EXHIBIT 10.6
TECHNOLOGY LICENSE AGREEMENT
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12-20-95
This Technology License agreement (the "Agreement") is entered into by and
between MagiNet International, Inc. ("MagiNet"), a California corporation having
a place of business at 405 Tasman Drive, Sunnyvale, California 94089, and
Guestserve Development Group, a California corporation ("GDG"), having a place
of business at 3020 Bridgeway, Sausalito, California 94965. The effective date
of this Agreement shall be the date last signed below ("Effective Date").
RECITALS:
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A. WHEREAS, MagiNet is in the business of providing consistent, high
quality guest in-room video and audio content, and related hardware, software
and services that permit transmission to rooms and remote selection of content
for customers in the hospitality industry worldwide;
B. WHEREAS, GDG is the owner of or has licensed the interactive guest
video services technology described in Exhibit A ("Technology Description") and
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certain intellectual property rights related to GDG's technology;
C. WHEREAS, MagiNet desires to obtain and GDG is willing to grant an
exclusive license with respect to GDG's current and next generation interactive
guest video services technology, within a specified geographic territory and
market;
D. WHEREAS, MagiNet may desire to obtain certain development services for
specified projects for MagiNet's hospitality industry customers.
AGREEMENT
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NOW THEREFORE, In consideration of the mutual promises and covenants set forth
below, the parties agree as follows:
1. Definitions. For purposes of this Agreement, the following terms shall
have the respective meanings indicated below:
1.1 Acceptance Criteria. "Acceptance Criteria" shall mean the
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criteria, tests, and standards including but not limited to the Documentation,
which is described in detail in the applicable Project Appendix or Exhibits and
which is used by MagiNet to determine whether or not to accept a deliverable
from GDG.
1.2 Activities. "Activities" shall mean updating, installation,
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operation, maintenance, current and future design activities, development
activities and ongoing maintenance
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the securities and exchange commission. Omitted
portions have been filed separately with the Commission.
of the MATV, Hardware, and Delivery Software (but not, except to the extent
expressly permitted herein, updating or development activities with respect to
the Development Software).
1.3 Application Software. "Application Software" shall mean guest
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video service software applications whether Current. Technology or Next
Generation Technology and all Upgrades thereto. The Application Software
displays Guest Services to the Guest through an Interface via an Output Device.
The term Application Software shall refer to the object code and source code
form of the Application Software and Upgrades unless otherwise specifically
stated in context.
1.4 Controlled Companies. "Controlled Companies" shall mean
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corporate entities as to which Johnathan Edwards and/or David Lampton: ( i) own
or control, directly or indirectly, at least fifty percent (50%) by nominal
value or number of units of outstanding stock or of the outstanding stock
conferring the right to vote at a general meeting, or ( ii ) has the right to
elect a majority of the Board of Directors or its equivalent or ( iii ) has the
right, directly or indirectly, to appoint or remove the management,
1.5 Converter. "Converter" shall mean the device in all its
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versions for both Current and Next Generation Technology as specified in Exhibit
B Attachments, and all Upgrades thereto, that links the television in the room
and the Network Control System Computer and that enables the Guest to access
Guest Services.
1.6 Delivery Software. "Delivery Software" shall mean the
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Application Software, Screen Managers, System Monitoring Tools and Upgrades
thereto, including operating system software, environments or applications
(other than Application Software) necessary for delivery of Guest Services,
except any Third Party Software. AU third party software (including without
limitation Windows NT, DOS, TCP/IP and Norton) used in conjunction with the
Software is publicly available and will be identified by MG to MagiNet and will
be licensed by MagiNet directly from third parties (and not from GDG) under
separate agreements to the extent necessary for the proper operation of the
System or Development Software. The term Delivery Software shall refer to the
object code and source code form of the Delivery Software unless otherwise
specifically stated in context.
1.7 Development Software. "Development Software" shall mean the
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Toolkit, the Language, and any Upgrades thereto, used in GDG's development
process for the Delivery Software, excluding any Third Party Software. All Third
Party Software used in conjunction with the Software is publicly available and
will be identified by GDG to MagiNet and will be licensed by MagiNet directly
from third parties (and not from GDG) under separate agreements to the extent
necessary for the proper operation of the System or Development Software. The
term Development Software shall refer to the object code form of the Development
Software unless otherwise specifically stated in context in this Agreement.
1.8 Documentation. "Documentation" shall mean any and all of the
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documents and specifications described in Exhibit ("Documentation"), or as
otherwise described in an
applicable Project Appendix or Exhibits, relating to the Technology. Such
Documentation shall be sufficient to enable MagiNet to operate, develop, upgrade
and maintain the Technology to which it pertains and Documentation shall be
provided for all Technology; except that the foregoing shall not include
Documentation for the Language; and except that the Toolkit Manual and any other
Documentation for the Toolkit is end-user documentation and shall not enable
MagiNet to develop, upgrade and maintain the Toolkit itself.
1.9 Error. "Error" shall mean a nonconformity that causes the
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Software not to perform in accordance with the applicable Documentation and or
Acceptance Criteria, as applicable.
1.10 File Server Interface. "File Server Interface" shall mean the
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interface between the NCS Computer and the Television Control Module or
Converter, and all Upgrades thereto.
1.11 GDG Trademarks. "GDG Trademarks" shall mean the trademarks,
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trade names, stylistic marks, logos and other product and corporate identifiers
used by GDG from time to time, whether registered or unregistered.
1.12 Guest. "Guest" shall mean the user of the Guest Services in a
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Hospitality Industry Provider facility or Service Apartment as defined herein.
1.13 Guest Services. "Guest Services" shall mean Hotel Services,
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Interactive Services, Movies, Third Party Content Delivery Services and any
other services described in a mutually agreed upon and executed Project Appendix
(as defined in Section 3.2) or as contained in an Exhibit hereto, which are
integrated by a party hereto into the System.
1.14 Hardware. "Hardware" shall mean the Television Control Module,
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the Headend Board, the Watchdog Board, the File Server Interface and the NTSC
Converter Control Module, Converters in all versions and all Upgrades thereto,
including but not limited to the digital file server interface and a PAL
converter control module in development. The term "Hardware" shall refer to the
actual device as well as the Documentation therefor, including but not limited
to all designs, specifications and drawings, as specifically stated in context
in this Agreement.
1.15 Headend Board, Network Control System Computer, Master Computer.
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The "Headend Board" is a device, and all Upgrades thereto, used with other
components within the "Network Control System Computer" that controls the
delivery of Guest Services and which interfaces with the Television Control
Module or Converter in the room.
1.16 Hospitality Industry; Hospitality Industry Provider.
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"Hospitality Industry" or "Hospitality Industry Provider" shall mean hotels,
motels and inns in the Territory and service apartments affiliated with or
directly serviced or managed by hotel, motel, or inn operators in the Territory
contracted to MagiNet.
1.17 Hotel Services. "Hotel Services" shall mean development,
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storage and transmission of Guest information and other similar services
including but not limited to ( i ) Guest billing status, ( ii) minibar
consumption and other charges, ( iii) hotel, transportation and restaurant
information display, ( iv) Guest oriented marketing information including but
not limited to display of infomercials, programs about the hotel and the
facilities or its related corporate entities and affiliates, advertising and
merchandising of products and services of the hotel or its related corporate
entities and affiliates, ( v) Guest messaging systems and services; (vi) and
other similar hotel oriented services.
1.18 Hyatt Software. "Hyatt Software" shall mean the Hyatt
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Development Software and the Hyatt Delivery Software specified under the terms
of that certain Master Guest Video Services Agreement made on September 15, 1995
by the parties hereto and Hyatt International-Asia Pacific Limited and Hyatt
Chain Services Limited (the "Master Guest Video Services Agreement"), which
Software is further described in Exhibit A ("Technical Requirements") thereto
and any other Software needed to perform the obligations under the Master Guest
Video Services Agreement,, excluding Third Party Software.
1.19 Hyatt Development Software. "Hyatt Development Software" shall
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mean the Toolkit specified under the terms of the Master Guest Video Services
Agreement and further described in Exhibit A ("Technical Requirements") thereto.
1.20 Hyatt Delivery Software. "Hyatt Delivery Software" shall mean
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the Delivery Software specified under the terms of the Master Guest Video
Services Agreement.
1.21 Hyatt Hardware. "Hyatt Hardware" shall mean the hardware
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specified under the terms of the Hyatt Master Guest Video Services Agreement and
further described in Exhibit A ("Technical Requirements") thereto and any other
Hardware needed to perform the obligations under the Master Guest Video Services
Agreement.
1.22 Hyatt Technology. "Hyatt Technology" shall mean the Hyatt
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Software and Hyatt Hardware.
1.23 Input Device. "Input Device" shall mean the various hardware
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devices which can be used by the Guest to invoke Guest Services, including but
not limited to television remote control devices, keyboards, joysticks, mice and
other pointing devices.
1.24 Interactive Services. "Interactive Services" shall mean
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interactive activities such as games and other educational, informational or
entertainment activities which utilize an interactive session directed through
use of an Input Device that elicits audio and or video content to be displayed
in the Guest's room, and Upgrades thereto.
1.25 Interface. "Interface" shall mean the software display,
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including the structure,, sequence, organization, look and feel of the display,
and all Upgrades thereto, through which the Guest selects Guest Services and
interacts with the Guest Services.
1.26 Language. "Language" shall mean GDG's next generation object
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oriented programming language and all Upgrades thereto for the creation of Guest
Services Delivery Software for the Hospitality Industry. The term "Language"
shall refer to the object code form of such software only, unless otherwise
specifically stated in context herein.
1.27 Licensed Rights. "Licensed Rights" shall mean (i) those U.S.
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and foreign patents, patent applications, trademark registrations and copyright
registrations listed in Exhibit C ("Intellectual Property"), which GDG
represents to constitute all patents, patent applications, trademark
registrations and copyright registrations related to the Technology presently
owned or licensed by GDG as of the Effective Date, (ii) all trade secrets,
inventions, know-how, unregistered copyrights (including related moral rights),
trademarks, and other proprietary rights related to the Technology presently
owned or licensed by GDG as of the Effective Date and (iii) all patents, patent
applications, copyright registrations, trademark registrations, trade secrets,
inventions, know-how, unregistered copyrights including related moral rights,
unregistered trademarks and other proprietary rights developed or obtained by
GDG (to the extent GDG is permitted to sublicense the same to MagiNet) during
the term of this Agreement related to the Technology and Upgrades, all of which
are licensed to MagiNet hereunder.
1.28 MagiNet Improvements. "MagiNet Improvements" shall mean
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software and or hardware invented by or authored by MagiNet as permitted by and
within the scope of this Agreement, which is a derivative of the GDG Technology.
1.29 MATV. "MATV" shall mean the then-current video and audio
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transmission and receiving systems, including antenna systems and all Guest room
wiring.
1.30 Movies. "Movies shall mean movies licensed for display under
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contract with the movie studios or their distributors.
1.31 Network Control System Computer. "Network Control System
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Computer" shall mean the, control processing unit that controls the delivery of
Guest Services.
1.32 North America. "North America" is defined, for purposes of this
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Agreement, as the United States (meaning the fifty (50) states) and Canada.
1.33 NTSC Converter Control Module. "NTSC Converter Control Module"
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shall mean the Current Technology converter control module, as designed to
function in accordance with North American standards, all Upgrades thereto.
1.34 Output Device. "Output Device" shall mean the various hardware
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devices which display the Guest Services, including but not limited to
televisions, monitors or headsets.
1.35 Related Technology. "Related Technology" shall mean (i) new
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software or hardware developed by GDG and or the Controlled Companies that is a
derivative work or improvement created from or based on the Technology or any
Upgrades to the Technology and
(ii) which was not in existence as of the Effective Date and `iii) which is
developed for use in the residential market and which is applicable to the
Hospitality Industry Provider market or may be made applicable to such market
through minor improvement.
1.36 Screen Managers. "Screen Managers" shall mean the software,
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including drivers, used to manage screen displays and all Upgrades thereto. The
term "Screen Managers" shall refer to the object code and source code form of
such software unless otherwise specifically stated in context.
1.37 Software. "Software" shall mean all Delivery Software and
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Development Software including both Current Technology and Next Generation
Technology. Software excludes all Third Party Software used in the operation of
the System, Delivery Software and Development Software.
1.38 System. "System" shall mean the Hardware and Delivery Software
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and all Upgrades thereto, used to transmit Guest Services, by means of an MATV
or other similar device, to Hospitality Industry Provider rooms and designed to
permit remote Guest selection of such Guest Services.
1.39 System Monitoring Tools. "System Monitoring tools' shall mean
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software tools and all Upgrades thereto, designed to provide information and
feedback about Systems and their use. The term "System Monitoring Tools" shall
refer to the object code and source code form of such software unless otherwise
specifically stated in context.
1.40 Television Control Module. "Television Control Module" or "TCM"
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shall mean a device which interfaces between the television and the Network
Control System Computer and all Upgrades thereto.
1.41 Territory. "Territory" shall mean the Hospitality Industry
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Providers market in the geographical territory of the world, excluding North
America.
1.42 Technology. "Technology" shall mean GDG"s guest video services
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technology whether owned, licensed or developed by GDG or the Controlled
Companies, including but not limited to all Hardware and Software, as described
in Exhibit A ('Technology Description') and all Upgrades thereto. The term
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"Current Technology" shall mean the Technology in use in hotels in North America
as of the Effective Date. The term "Next Generation Technology" shall mean
Technology developed using principally the C++ programming language and
including the Language and Toolkit, which operates under a Windows NT operating
system, and which is intended to replace and extend the utility of the Current
Technology.
1.43 Third Party Content Delivery Services. "Third Party Content
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Delivery Services" shall mean software used to display third party
informercials, third party informational, educational and/or entertainment
programs, including programs on other hotels,
resorts or Hospitality Industry Provider facilities, third party advertising and
merchandising (including ordering) of products and services (including but not
limited to hotel, resort or other Hospitality Industry Provider Products and
services) and/or display of other third party content (including but not limited
to off-air broadcast satellite and cable television and transmissions and
televised events). using pricipally the C++ programming language and including
the Language and Toolkit
1.44 Third Party Software. "Third Party Software" shall mean
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software developed and or licensed by third parties, not including Controlled
Companies.
1.45 Toolkit. "Toolkit" shall mean GDG's Next Generation Technology
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proprietary software application development toolkit and all Upgrades thereto,
that enable the programmer to create and update content for display as part of
Guest Services. The term "Toolkit" shall refer to the object code form of such
software only, unless otherwise specifically stated in context herein.
1.46 Toolkit Manual. "Toolkit Manual" shall mean the manual and all
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Upgrades thereto, that describes the functions and features of the Toolkit in
sufficient detail to permit a programmer to use the toolkit to create and update
content for display on a guest video services system.
1.47 Upgrades. An "Upgrade" shall mean any (i) enhancement, (ii)
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extension, (iii) modification, (iv) upgrade or (v) future applications of the
Technology, which are done for use in Hospitality Industry, and which are not
Related Technology, that are wholly or partially based upon the Technology,
along with associated Documentation, all to the extent developed by or for GDG
or Controlled Companies on or before December 31, 2002.
1.48 Watchdog Board. "Watchdog Board" shall mean the device that
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monitors the functions of the Network Control System Computer and all Upgrades
thereto.
2. Project Work. From time to time MagiNet will negotiate agreements
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with Hospitality Industry Providers for Guest Services which will require
MagiNet to perform related Activities. If MagiNet wishes to subcontract some of
the related Activities to GDG, MagiNet will prepare, a Project Appendix in the
form described in Exhibit E ("Sample Project Appendix") which will describe in
detail, at a minimum, as applicable: (i) any special terms and conditions for
the project, (ii) the scope of the Activities to be performed by GDG, (iii) the
specifications (including user interface and low level design specifications, if
applicable), (iv) the milestone schedule and acceptance testing criteria for the
particular project and (v) the payment structure for the particular project. The
parties will negotiate the terms of each Project Appendix in good faith and upon
mutual agreement on the terms therein, such Project Appendix will be signed by
both parties and the results of such Activities by GDG will be deemed licensed
to MagiNet as set forth herein.
3. License Grants.
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3.1 License to the Technology. GDG hereby grants to MagiNet a
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perpetual, irrevocable (subject to subsection (f)), transferable (subject to
subsections (g), (i), (j) and Section 8.3) license as stipulated below (the
"License") under the Licensed Rights, in the Territory to use the Technology,
Upgrades and Documentation to provide Guest Services and:
(a) An exclusive right to use, make, create, modify, translate, reproduce,
(and to have made, modified, translated and reproduced), demonstrate, market,
distribute, lease, license, sell, sublicense, assign, maintain and support
products and services incorporating the Software and related Documentation,
directly or indirectly through MagiNet's usual channels of distribution in the
Hospitality Industry (except Service Apartments, as set forth in subsection (b)
in the Territory;and
(b) A non-exclusive right to use make, create, modify, translate,
reproduce, (and to have made, modified, translated and reproduced) demonstrate,
market, distribute, lease, license, sell, sublicense, assign, maintain and
support products and services incorporating the Software and related
Documentation, to service apartments directly serviced or managed by Hospitality
Industry Providers under contract to MagiNet ("Service Apartments") in the
Territory; and
(c) An exclusive right to use, make, modify, manufacture and repair or
have used, made, modified, manufactured and repaired the Hardware and to
demonstrate, market, distribute, sell, lease, maintain and support the Hardware
and related Documentation for use in the Hospitality Industry, in the Territory.
The foregoing is subject to the provision that MagiNet may only disclose that
Technology which is necessary for the manufacture of Hardware to a third party
manufacturer if each such third -party manufacturer has agreed in a signed
writing prior to receiving the Technology (i) to manufacture Hardware only for
the account of MagiNet or MagiNet's majority owned subsidiaries or third party
distributors, (ii) to keep the Technology confidential pursuant to terms and
conditions no less restrictive than those set forth in Section 8 hereof, and
(iii) that GDG is an intended third party beneficiary of such agreement and is
entitled to enforce the terms directly related to the confidential treatment of
the Technology directly against such third party manufacturer.
(d) A non-exclusive right to use, make, modify, manufacture and repair or
have used, made, modified, manufactured and repaired the Hardware and to
demonstrate, market, distribute, sell, lease, maintain and support the Hardware
and related Documentation for use in Service Apartments in the Territory. The
foregoing is subject to the provision that MagiNet may only disclose that
Technology which is necessary for the manufacture of Hardware to a third party
manufacturer if each such third party manufacturer has agreed in a signed
writing prior to receiving the Technology (i) to manufacture Hardware only for
the account of MagiNet or MagiNet's majority owned subsidiaries or third party
distributors, (ii) to keep the Technology confidential pursuant to terms and
conditions no less restrictive than those set forth in Section 8 hereof, and
(iii) that GDG is an intended third party beneficiary of such agreement and is
entitled to enforce the terms directly related to the confidential treatment of
the Technology directly against such third party manufacturer.
(e) MagiNet shall cease distributing Software to new Hospitality Industry
Providers' locations in the event and at the time that MagiNet provides GDG with
written notice of its intention to cease distribution as described in Exhibit B.
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(f) The licenses set forth in this Section 3. 1 are irrevocable, except
that the License shall terminate in accordance with Section 12 hereof in the
event of (i) MagiNet's failure to pay installment payment fees when due (except
for installment payment fees which MagiNet has reasonably contested in writing
in good faith after notice and an opportunity to cure), or (ii) MagiNet's gross
negligence or willful misconduct which results in a breach of its obligations
under Section 8 hereof or the impermissible disclosure or distribution of the
Technology or a breach of its obligations under Section 3. 1, after notice and
an opportunity to cure.
(g) Subject to the terms and conditions of this subsection 3. 1(g),
MagiNet may assign or grant sublicenses of the source code rights granted to it
(exclusive of access privledges and escrow agreement terms in Section 8 below)
under Section 3.1 to third parties for the Hospitality Industry pursuant to
signed, written assignment or sublicense
agreements in which such assignees or sublicensees agree to the terms and
conditions binding on MagiNet in this Agreement and which acknowledge GDG's
right to enforce the assignment or sublicense directly against the assignee or
sublicensee. MagiNet shall use all reasonable efforts to enforce such
agreements.
(h) GDG retains all other rights in and to the Licensed Technology. No
rights are granted to MagiNet, except as expressly provided in this Agreement.
(i) MagiNet shall reproduce and apply GDG's copyright and patent and may
reproduce and apply GDG's trademark and other proprietary rights notices of GDG
on all copies of the Software, Hardware and Documentation in the same manner as
GDG incorporates or applies the same in or on the Software, Hardware and
Documentation or in any manner reasonably requested by GDG.
(j) In the event that MagiNet assigns its rights and obligations under
this Agreement to a majority owned subsidiary of MagiNet, MagiNet shall
guarantee all of its obligations herein. MagiNet may transfer its rights and
obligations under this Agreement to a majority owned subsidiary or to a third
party who agrees in a signed writing to be bound by all terms and conditions
hereof, and provided that any attempted transfer to an entity which competes
with GDG or a Controlled Company in the Hospitality Industry in North America or
the residential market worldwide shall be null and void. Upon written request by
MagiNet, GDG will verify whether or not a proposed third party meets the
foregoing criteria and will provide written substantiation of the competition.
3.2 License Grant to GDG. Subject to the parties agreement on
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royalty and/or license fees, MagiNet hereby grants to GDG an exclusive,
perpetual, irrevocable (subject to subsection (d), transferable (subject to
subsections (e), (h) and Section 8.3) license as stipulated
below, (the "MagiNet License") under MagiNet's intellectual property rights in
all MagiNet Improvements, to provide guest video services in the Hospitality
Industry in North America, (which MagiNet must offer, on a periodic basis, to
license to GDG)
(a) An exclusive right to use, make, create, modify, translate, reproduce,
(and to have made, modified, translated and reproduced) demonstrate, market,
distribute, lease, license, sell, sublicense, assign, maintain and support
products and services incorporating the MagiNet Improvements and related
Documentation, directly or indirectly through GDG's usual channels of
distribution in the Hospitality Industry (except Service Apartments, as set
forth in subsection (b)) in North America; and
(b) A non-exclusive right to use make, create, modify, translate,
reproduce, (and to have made, modified, translated and reproduced) demonstrate,
market, distribute, lease, license, sell, sublicense, assign, maintain and
support products and services incorporating the MagiNet Improvements and related
Documentation, directly and indirectly through GDG's usual channels of
distribution to service apartments serviced or managed by GDG's sublicensees
("Service Apartments") worldwide; provided such right will not apply to any
actual or potential MagiNet Service Apartment as defined herein.
(c) A non-exclusive right to use, make, modify, manufacture and repair or
have used, made, modified, manufactured and repaired the MagiNet Improvements in
hardware and to demonstrate, market, distribute, sell,, lease, maintain and
support such hardware and related Documentation to Hospitality Industry
Providers in North America, and including Service Apartments worldwide
(excluding those managed by Hospitality Industry Providers under contract to
MagiNet). The foregoing is subject to the provision that GDG may only provide
the portions of the MagiNet Improvements which is necessary for the manufacture
of such hardware to a third party manufacturer and only if each such third party
manufacturer has agreed in a signed writing prior to receiving the Maginet
Improvements (i) to manufacture such hardware only for GDG's account, (ii) to
keep the MagiNet hardware Improvements confidential pursuant to terms and
conditions no less restrictive than those set forth in Section 8 hereof, and
(iii) that MagiNet is an intended third party beneficiary of such agreement and
is entitled to enforce the terms directly related to the confidential treatment
of the Improvements directly against such third party manufacturer.
(d) The MagiNet Licenses set forth in this Section 3.2 are irrevocable,
except that the MagiNet License shall terminate in accordance with Section 12
hereof in the event of (i) GDG's failure to pay royalty fees when due (except
for royalty fees which GDG has reasonably contested in writing in good faith),
or (ii) GDG's gross negligence or willful misconduct which results in a breach
of its obligations under Section 8 hereof or the impermissible disclosure or
distribution obligations under Section 3.2 after notice and an opportunity to
cure.
(e) Subject to the terms and conditions contained herein, GDG may assign
or grant sublicenses of the source code rights granted to it under Section 3.2
to third parties in North America for the Hospitality Industry and Service
Apartments worldwide (except those actual or
potential MagiNet Service Apartments as defined herein) pursuant to signed,
written sublicense agreements in which such sublicensees agree to the terms and
conditions binding on GDG in this Agreement and which acknowledge MagiNet's
right to enforce the assignment or sublicense directly against the assignee or
sublicensee. GDG shall use all reasonable efforts to enforce such agreements.
(f) MagiNet retains all other rights in and to the MagiNet
Improvements. No rights are granted to GDG, except as expressly provided in
this Agreement.
(g) GDG shall reproduce and apply MagiNet's copyright, trademarks,
patent and other proprietary rights or notices of MagiNet on all copies of the
MagiNet Improvements and related documentation in the same manner as MagiNet
incorporates or applies the same in or on the MagiNet Improvements and related
documentation or in any manner reasonably requested by MagiNet.
(h) In the event that GDG assigns its rights and obligations under
this Agreement to a majority owned subsidiary of GDG or a Controlled Company,
GDG shall guarantee all of such subsidiary's or Controlled Company's obligations
herein. GDG may transfer its rights and obligations under this Agreement to a
majority owned subsidiary of GDG or to a Controlled Company who agrees in a
signed writing to be bound by all terms and conditions hereof but only so long
as such subsidiary or a Controlled Company also has obtained the ownership or
licenses necessary to grant the license granted herein and to perform the
services described herein.
3.3 Technology Transfer
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(a) GDG shall deliver to MagiNet, at the times set forth in
Exhibit B, one copy of
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(i) each Hardware or Software specification or
design,
(ii) the source and object code versions of all
Delivery software,
(iii) the object code versions of all Development
Software,
(iv) all Documentation,
(v) all Hardware parts lists (showing the vendor of
each part), and
(vi) each marketing brochure or publication, or sales
tool, used by GDG for the Hardware or Software.
(vii) Within thirty (30) days after completion of
certification and readiness to deploy its Next Generation Technology, GDG shall
deliver one copy of Next Generation Software and Development Software in object
code only (source and object for
Delivery Software) to MagiNet, and related Documentation. Within thirty (30)
days completion of certification and readiness to deploy an Upgrade to Software
or Hardware, GDG shall deliver such materials relating to the Upgrade and
related Documentation to MagiNet.
(viii) a complete Software bug list as of the delivery date
and on a continuing bait at least quarterly, as bugs are known to exist.
(b) Within five days after the Effective Date of this Agreement, GDG
will give written notice to each vendor from which GDG purchases Hardware
components, for which MagiNet has received a License relating to Hardware, that
MagiNet has the right to purchase such components directly from such vendors
under any volume discounts or quantity pricing and terms applicable to GDG.
(i) GDG's vendor list, which GDG hereby agrees to provide
MagiNet within ten (10) days following the Effective Date, is a complete and
accurate list of all of the vendors who supply any parts to GDG for GDG's
manufacture of the Technology, and accurately indicates which of such vendors
are sole source vendors to GDG, all as of the date of this Agreement. As used
herein, a "sole source vendor" shall mean a vendor who is the only manufacturer
for GDG of a part for any Technology and "sole source part" shall mean a part
for which GDG has only one manufacturer.
(ii) Update of Vendor List. GDG agrees to provide to
MagiNet, at times reasonably requested by MagiNet, on a continuing basis, a
complete and accurate list of vendors for the Technology, if any, as of the
request date, which fist indicates which of such vendors are or are expected to
be sole source vendors to GDG.
(iii) Second Source. GDG and MagiNet agree to notify each
other during the first two (2) years after the Effective Date of the identify of
a second manufacturer of a sole source part for the Technology, if any, within
thirty (30) days after learning the identity of any such manufacturer.
(c) GDG will provide at no charge within ninety (90) days after the
date of this Agreement up to twenty-two (22) working days of training for up to
six MagiNet employees at GDG's facilities in Northern California, and a further
twenty-two (22) working days of training shall be provided after ninety (90)
days after the date of this Agreement and before one year after the date of this
Agreement. Training will occur at times mutually agreed by GDG and MagiNet.
MagiNet shall bear all expenses of its employees. The training will be
sufficient to allow a skilled software engineer to create and modify
Applications using the Current Software and the Next Generation Software. After
one year after the date of this Agreement, GDG will provide at no charge
periodic training for up to six (6) MagiNet employees at GDG locations
concerning Upgrades to the Software.
(d) GDG shall provide a competent technical liaison to answer
periodic
12
questions of MagiNet personnel during normal business hours relating to Hardware
and Software development, maintenance and operation. GDG shall provide such
liaison at no charge during the first six months after the first twenty-two (22)
working days of training described in the preceding paragraph have been
completed. After such six month period ends GDG shall provide such liaison to
MagiNet at its lowest fee for such services charged to a customer of GDG.
(e) GDG and MagiNet shall meet on a periodic basis at least annually
to exchange ideas, market requirements and current and planned developments as a
means of fostering a cooperative and mutually beneficial relationship.
(f) If, as set forth in Section 1.47, GDG or a Controlled Company
creates any Upgrade, then GDG or such Controlled Company shall make such
Upgrades available to MagiNet
within thirty (30) days following release of such Upgrade, at no charge.
(g) On an ongoing basis, GDG agrees to provide Error corrections in
accordance with the resolution times required by the severity level codes
described in Exhibit ("Severity Codes"). GDG shall furnish off-site telephone,
facsimile and electronic mail support, in the form of consultations, assistance
and advice relating to the Error corrections. MagiNet shall submit to GDG
whatever additional data which GDG may reasonably request in order to verify,
diagnose and correct the Error. GDG will use all reasonable efforts to resolve
the Error in accordance with the Severity Codes. GDGs obligations under this
subsection (g) are subject to MagiNet's providing to GDG, at the time of each
report of an Error at a Hospitality Industry Provider, the number of each
applicable modem where such an Error has been identified to exist, to allow
remote access to such modem(s).
(h) For all Software delivered by GDG to Maginet under the terms of
this Agreement, including any Software developed under the terms of a Project
Appendix, MagiNet shall have thirty (30) days (or such other time as may be
mutually agreed upon in the applicable Project Appendix) from the date on which
GDG delivers the Software to MagiNet (the "Acceptance Period") to examine and
test the delivered software to determine that such Software conforms to the
applicable Acceptance Criteria (which in the case of Software delivered other
than under a Project Appendix, will be the Documentation). Within such
Acceptance Period, MagiNet shall provide GDG with written acceptance of the
delivered code or a statement of effors to be corrected, If the Software does
not conform to the Acceptance Criteria, the statement of Errors will rank the
Errors as described in Exhibit H ("Severity Code"). GDG shall correct such
Errors and redeliver the Software to MagiNet, at MagiNet's direction relative to
correction of all or some of the Errors based on both parties' reasonable
assessment of functionality and market need. Both parties agree to reassess
appropriate timelines for resolution of all remaining errors, if any, for
acceptable workarounds in the event no correction is possible to provide the
functionality desired due to third party equipment or software interface that
interferes with arriving at the desired-functionality.
4. Assignment of Distributor Agreements. GDG shall assign to MagiNet
upon
13
signing of this Agreement, all agreements with TRB, UMDA and any other
authorized distributor(s) of Hardware and/or Software in the Territory for the
Hospitality Industry, all of which as of the Effective Date are listed in
Exhibit F ("GDG distributors"). GDG hereby indemnifies MagiNet against any claim
- ---------
by a GDG distributor or any customer of such distributor, arising from GDG's
negligence or willfull misconduct or "GDG's failure to perform any GDG
obligation or to fulfill any GDG commitment made before the effective date of
the assignment. MagiNet hereby indemnifies GDG against any claim by a GDG
distributor or any customer of such distributor arising from MagiNet's
negligence or willful misconduct or MagiNet's failure to perform any MagiNet
obligation or to fulfill any MagiNet commitment made after the effective date of
such assignment. The indemnification procedures described in Paragraph 11
("Indemnification") shall govern any claim for indemnification.
5. Sale of Hardware
----------------
5.1 Sale of Hardware. For so long as GDG or a Controlled Company is
----------------
in the business of assembling and selling Hardware, GDG agrees that, pursuant to
purchase orders submitted by MagiNet and accepted by GDG or the applicable
Controlled Company in its reasonable discretion, GDG shall sell or shall cause a
Controlled Company to sell, Hardware to MagiNet at a price equal to GDG's
materials cost therefore plus a markup of [***]. In all instances in Section 5
where obligations involve the Controlled Companies, GDG agrees to guarantee the
performance of each such obligation hereunder. The parties agree that
notwithstanding anything to the contrary set forth in the parties' purchase
orders, acknowledgments, acceptance, invoices or other similar documents,
MagiNet may resell, lease, rent or otherwise distribute such Hardware only as
permitted herein. Other terms and conditions, such as delivery dates,
quantities, or deposits required by GDG suppliers, of MagiNet's purchase of
Hardware from GDG shall be as set forth in the parties' purchase orders,
acknowledgments, acceptances, invoices or other similar documents, except where
contradicted by the terms of this Section 5.
5.2 Manufacture by MagiNet. GDG acknowledges that MagiNet may
----------------------
manufacture the Hardware directly or purchase the Hardware from third party
manufacturers (subject to the terms and conditions of Section 3.1(c)) and is
under no obligation to purchase the Hardware from GDG exclusively or at all.
5.3 Forecasts. MagiNet agrees to use reasonable efforts to provide
---------
GDG or the applicable Controlled Company, in response to GDG's-or such
Controlled Company's requests from time to time, with non-binding forecasts of
MagiNet's anticipated aggregate requirements for Hardware during the twelve (12)
month period following each such request. GDG acknowledges, and acknowledges on
behalf of such Controlled Companies, that such forecasts are estimates only, are
inherently uncertain, and are not purchase orders or otherwise binding on the
parties.
5.4 Purchase Orders. Within ten (10) days of receipt of each of
---------------
MagiNet's
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the securities and exchange commission. Omitted
portions have been filed separately with the Commission.
14
purchase order GDG or a Controlled Company will either (i) issue a written
acceptance of MagiNet's purchase order or (ii) specify in writing the reasons
why GDG or such Controlled Company cannot accept such purchase order. If no
such acceptance or specification of reasons is given by GDG or a Controlled
Company, GDG or such Controlled Company will be deemed to have accepted the
purchase order. MagiNet will have the right to cancel any order, subject to a
10% cancellation fee, provided that GDG or such Controlled Company is notified
of such cancellation in writing at least forty five (45) days prior to the
shipment date. GDG will comply, and will ensure that any applicable Controlled
Company complies, with all instructions of MagiNet to reschedule shipments
provided that GDG receives such rescheduling instructions at last fifteen (15)
days prior to a scheduled shipment date. With respect to MagiNet orders
accepted by GDG or -a Controlled Company, GDG will, and will cause any relevant
Controlled Companies to, use all reasonable efforts to ship units of the
Hardware to MagiNet in accordance with shipment dates, routing instructions,
quantities, shipping addresses, and manner of shipment specified in MagiNet's
purchase orders. In the event GDG or a Controlled Company is required to make
deposits against the purchase of materials with respect to any particular
MagiNet order, MagiNet will similarly be required to pay such deposits to GDG or
such Controlled Company prior to GDG's or such Controlled Company's acceptance
of such order.
5.5 Payment Terms: CAM or a Controlled Company may invoice MagiNet
-------------
for Hardware following shipment (but not earlier than MagiNet's requested
shipment date). MagiNet will pay such invoices within thirty (30) days of
receipt of invoice. Each invoice will indicate the number of the units shipped,
the shipping date and method, and will be accompanied by a bill of lading or
other documentation issued by the carrier. All prices stated and payments made
hereunder will be in U.S. Dollars.
5.6 Shipments. Shipments will be packaged (i) in accordance with
---------
good commercial practice, and (ii) in a manner acceptable to common carriers and
suitable for air transport. Shipment will be F.O.B. GDG's facility. At MagiNet's
request, on a per purchase order basis, GDG will, and will cause any applicable
Controlled Company to, prepay all shipping fees and bill MagiNet for such costs.
5.7 Problem Reports. GDG will promptly notify MagiNet of any matter
---------------
which (i) has or could reasonably be expected to impact Hardware quality, or
(ii) has delayed or could reasonably be expected to delay scheduled deliveries,
including details of the anticipated effects on GDG's or an applicable
Controlled Company's performance of its obligations under this Agreement.
5.8 Hardware Acceptance. For each unit of Hardware, MagiNet will
-------------------
have thirty (30) calendar days from the date such unit is received by MagiNet or
its subsidiary or customer (the "Acceptance Period") to examine and test the
Hardware unit for conformity with the applicable specifications. During the
Acceptance Period for each unit, MagiNet may (i) accept the unit or (ii) reject
the unit by notifying GDG in writing of the manner in which the unit fails to
conform to the applicable specification. Any unit not expressly rejected by
MagiNet
15
within the Acceptance Period will be deemed to be accepted by MagiNet as of the
first day following the Acceptance Period. In the event that a unit is
rejected, MagiNet may under terms of Paragraph 5.9 ("Product Warranty") below,
either (i) return the unit to GDG for replacement with a new conforming unit, or
(ii) permit GDG to modify the unit to correct the nonconformity (e.g., by
providing replacement components and modification instructions to MagiNet).
Units that are replaced or modified pursuant to this Paragraph 5.8 will be
subject to a new Acceptance Period. The Hardware warranty period set forth in
Paragraph 5.9 ("Product Warranty") below will run from MagiNet's express or
deemed acceptance of a conforming unit.
5.9 Product Warranty. GDG warrants, and shall cause any applicable
----------------
Controlled Company to warrant, to MagiNet that, for a period of one (1) year
from the date MagiNet delivers a Hardware unit to a customer, but in no event
more than eighteen (18) months from the date of delivery to MagiNet or MagiNet
designee specified in MagiNet's purchase order, such Hardware unit will conform
to the specifications and will be free from any defects in material or
workmanship. MagiNet's sole and exclusive remedy, and GDG or any Controlled
Company's exclusive obligation, for a breach of the foregoing warranty shall be
for GDG or such Controlled Company to repair or replace (at GDG's or such
Controlled Company's option and expense) defective Hardware units promptly after
receipt thereof at GDG's or such Controlled Company's facility. MagiNet will be
responsible for all costs of shipping defective units And parts to GDG's or the
Controlled Company's facility. GDG or such Controlled Company will be
responsible for all return shipping costs of repaired or replacement units;
provided, that if GDG's testing reveals no defect in the Hardware shipped by
MagiNet, GDG shall have no obligation to repair or replace such Hardware and
MagiNet shall be responsible for all returns shipping costs. GDG grants, and
will cause any applicable Controlled Companies to grant, MagiNet the right to
pass through this warranty to MagiNet's customers (whether directly or
indirectly, via a subsidiary or distributor) and such warranty will run directly
from GDG or such Controlled Company to MagiNet's customers beginning from the
date such customers receive the Hardware unit.
5.10 Late Payment In the event that MaGiNet is in arrears in payment
------------
for any shipped Hardware, GDG or the applicable Controlled Company shall have
the right to, at its option, cease shipment of Hardware to MagiNet, or demand
full payment from MagiNet before making any further shipments of Hardware.
5.11 Hardware Selection. MagiNet may use the Software with any
------------------
hardware and is not required to use or distribute the Hardware exclusively or at
all.
6. Related Technology
------------------
6.1 Related Technology License. Provided that MagiNet is not in
--------------------------
arrears with respect to its payment obligations described in Section 7, with
respect to any Related Technology developed by GDG using the Language ("Related
Technology"), GDG shall offer in writing to MagiNet a License on commercially
reasonable terms for such Related Technology pursuant to
16
this Agreement, which GDG develops or has developed, which can be operated, or
made to operate with minor modifications, with the Technology, to the extent GDG
has the right to license such Related Technology to MagiNet. The parties shall,
for a period of thirty (30) days after the date of GDG's written offer (the
"Negotiation Period") negotiate in good faith to mutually agree upon a royalty
rate for each Related Technology development. Should GDG offer a third party
different and/or more favorable terms than those offered during the Negotiation
Period, GDG agrees to offer the same terms to MagiNet and the parties shall
negotiate in good faith for an additional thirty (30) day negotiation period as
described above. GDG agrees not to sell Related Technology to any third party
for use in the Hospitality Industry in the Territory.
6.2 Content Right of First Offer. MagiNet shall keep GDG advised of
-----------------------------
its requirements for content and GDG shall have right of first offer to develop
for MagiNet or directly with Hyatt for Hyatt content and sell or license such
content or development services to MagiNet or directly to Hyatt for Hyatt
content prior to MagiNet concluding any agreement with a third party for the
development and or license of such content. Upon its receipt of MagiNet's
request for offer, GDG shall have thirty (30) days (the "Offer Period") in which
to prepare and deliver a written offer to MagiNet with respect to such
development and licensing which will include a detailed specification,
availability schedule and price. MagiNet shall not conclude any agreement with a
third party for such development and licensing prior to the end of such Offer
Period. MagiNet may accept or reject GDG's offer in its sole judgement. The
parties agree that in respect of the Master Guest Video Services Agreement that
the revenue shares allocated to the parties will be split on a 50/50 basis for
all advertising brought to the parties of the Master Guest Video Services
Agreement by GDG or Hyatt Parties. GDG's revenue share for advertising provided
by Hyatt Parties' will be contingent on GDG exercising its first right of offer
to perform any design or interface work for such advertisers. MagiNet shall have
the right to use all creative assets produced by GDG for such advertisers at no
cost in the event MagiNet is able to independently sell such advertisers on
deployment of the same assets on MagiNet's other licensed rooms.
7. License and Installment Payments and Deposits.
----------------------------------------------
7.1 MagiNet Payment to GDG. MagiNet agrees to pay GDG payments and
----------------------
deposits against payments as described in Exhibit B ("License Payments and
---------
Payments Deposits") in accordance with the payment terms therein. MagiNet shall
provide GDG with payment reports within forty-five (45) days after the end of
each calendar quarter, stating in reasonable detail the number of rooms on which
payments have accrued pursuant to the terms of Exhibit B ("License Payments and
------- --
Payment Deposits"). MagiNet shall provide such report even if no installment
payments were generated during the reporting period. MagiNet shall keep, and
shall obligate its assignees and sublicensees (including without limitation
distributors) to keep, complete and accurate books and records for the purpose
of determining the amounts payable to GDG under this Agreement, which books and
records shall include, without limitation, records of the number and identity of
rooms for which an installment payment is due and the identity of the
Hospitality
17
Industry Provider who lets such rooms. Such books and records shall be kept at
MagiNet's and it assignees and sublicensees' principal places of business for
two (2) years after the end of the calendar quarter to which they relate. GDG's
certified public accountant will have the right to audit such books and records
for a period of two (2) years after submission of each payment report. If any
audit demonstrates that MagiNet has underpaid installment payment for any
calendar year by more than five percent (5%), then MagiNet shall reimburse GDG
for the reasonable costs of the audit and shall pay the underpaid installments
together with simple interest thereon from the date due until paid at the rate
of one hundred and ten percent (110%) of the prime or reference rate published
by Bank of America NT and SA from time to time.
7.2 GDG Royalties to MagiNet. Terms for royalty payments to MagiNet
------------------------
will be negotiated at the time licensed by GDG.
7.3 MagiNet Royalties to GDG for Related Technology. Terms for
------------------------------------------------
royalty payments to GDG will be negotiated at the time licensed by MagiNet.
8. Protection of Proprietary Rights
---------------------------------
8.1 Non-Disclosure.
--------------
8.1.1 Obligations: During the term of this Agreement, each party
-----------
may be exposed to certain information concerning, GDG information, the
Technology, Related Technology, Upgrades and/or MagiNet information and MagiNet
Improvements, as applicable, designated as confidential information in
accordance with the terms of Paragraph 8.1.2 ("Designation of Confidential
Information"). Each party agrees that it will not use or disclose to any third
party any of the other party's confidential information without the prior
written consent of the disclosing party except as expressly permitted herein.
Each party hereby consents to the disclosure of its confidential information to
employees and independent contractors of the other party, and to employees of
such other party's majority-held subsidiaries with a need to know and to such
other party's manufacturers and distributors with a need to know.
8.1.2 Designation of Confidential Information: Each Party's
---------------------------------------
confidential information shall, if in written form, be marked "Confidential" or
similarly legended by the other party before being furnished to the other party.
AU oral disclosure of confidential information shall be identified as such prior
to disclosure and summarized, in writing, by the disclosing party and said
summery shall be given to the other party within thirty (30) days of the oral
disclosure.
8.1.3 Exception. Each Party or parties permitted to receive the
---------
confidential information from the other party ("Receiving Parties") in
accordance with this Paragraph 8. 1 ("Non-disclosure") shall not be liable for
disclosure or use of any disclosing party data or information which (i) was in
the public domain at the time it was disclosed to the Receiving Parties or falls
within the public domain during the term of this Agreement, except through the
fault of the Receiving Party; (ii) was known to the Receiving Party at the time
of
18
disclosure; (iii) was disclosed by the Receiving Party after written approval of
the disclosing party; (iv) becomes known to the Receiving Party from a source
other than the disclosing party without breach of this Agreement by the other
party or a Receiving Party; or (v) was independently developed by the Receiving
Party without the benefit of confidential information received from the
disclosing party.
8.2 Use of Trademarks. GDG grants MagiNet an exclusive license to
-----------------
use the GDG Trademarks which are associated with the Technology, Upgrades and
Related Technology licensed to MagiNet in the Hospitality Industry, in the
Territory in connection with MagiNet's use of the Technology, Upgrades, Related
Technology, if any, and all related advertising and promotional materials.
MagiNet shall provide GDG with a reasonable number of samples of MagiNet's use
of GDG trademarks upon request. All representations of the GDG Trademarks shall
either be exact copies of those used by GDG or shall first be submitted to GDG
for its approval (which shall not be unreasonably withheld) prior to the first
use thereof Once a particular use of a GDG trademark image is approved by GDG,
MagiNet agrees not to alter such image without seeking GDG's prior review and
approval. MagiNet will not oppose any registration of the GDG trademarks by GDG
or a Controlled Company for use in North America. GDG makes no representation
concerning the enforceability of the GDG Trademarks in the Territory or whether
the GDG Trademarks infringe on the rights of third parties in the Territory.
MagiNet, at its expense, may register the GDG Trademarks in the Territory and
MagiNet will own such registrations. MagiNet will provide GDG copies of such
registration certificates when received. In the event that this Agreement
terminates other than for material breach by GDG prior to the time that (i) GDG
has received cash payments from MagiNet equaling or exceeding [***] in the
aggregate hereunder or (ii) December 31, 2002, MagiNet agrees to reassign to
GDG, and does hereby assign to GDG, any and all GDG Trademarks registered by
MagiNet in the Territory, along with all goodwill pertaining thereto. Upon any
termination of this agreement, MagiNet shall immediately cease displaying and
using GDG Trademarks.
8.3 Property Rights, GDG retains all right, title and interest in and
---------------
to the Technology, Upgrades and Related Technology, if any, subject to the
licenses granted herein. MagiNet retains all right, title and interest in and to
the MagiNet Improvements, subject to the licenses granted herein. Each Party
agrees to and will include, in all assignments and sublicenses which permit
reproduction or manufacture, an obligation to apply appropriate copyright,
trademark and other proprietary rights notices in or on the Technology,
Upgrades, and any Related Technology, if any, or MagiNet Improvements, as
applicable.
8.4 Source Code and Source Code Access. Within five (5) days after
----------------------------------
completion and satisfactory demonstration of Next Generation Technology, as
specified in Exhibit B, GDG shall place the source code for all components of
---------
the Language and Toolkit in a mutually agreed upon source code escrow account
pursuant to the Software Escrow Agreement attached as Exhibit G ("Source Code
----------
Escrow") hereto. MagiNet shall pay any and all annual fees, deposit fees,
reporting fees and any other fees and costs associated with such escrow;
however,
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
19
GDG will bear the cost of creating the deposit and all updates thereto. In
addition, GDG hereby grants to MagiNet a right to access the source code for all
components of the Toolkit and Language at GDG's facility, as may be needed in
order to insure that MagiNet will meet its commitments with respect to Delivery
Software to MagiNet's Hospitality Industry Provider customers. Such access will
be done during normal business hours and for a specific work that GDG has been
unable or unwilling to perform. Any and all modifications to the Toolkit and
Language made by MagiNet shall be owned by MG (and licensed to MagiNet hereunder
for no additional charge in object code format), and MagiNet agrees to assign,
and does hereby assign to GDG, all right, title and interest therein. The
modified Toolkit and Language will be compiled at GDG so that MagiNet can remove
an object code copy of the modified Toolkit and Language to be used by MagiNet
under the terms of this Agreement.
8.5 Reverse Engineering. With respect to any Software which is
-------------------
licensed to MagiNet under this Agreement solely in object code format, except as
otherwise provided for herein, MagiNet shall not, and shall require that its
assignees and sublicensees do not, reverse engineer, decompile, disassemble,
modify or otherwise have or attempt to have access to the source code of such
Software, except as allowed under Sections 8.4 and 8.6 herein. With respect to
any MagiNet Improvements which are licensed to GDG under this Agreement solely
in object code format, GDG shall not, and shall require that its assignees and
sublicensees do not, reverse engineer, decompile, disassemble, modify or
otherwise have or attempt to have access to the source code of such MagiNet
Improvement software.
8.6 Conditions for Release of Escrow Deposits. Source code and
-----------------------------------------
related documentation for the Language and Toolkit will be released under terms
of the Source Code Escrow Agreement attached as Exhibit G if (i) GDG is declared
----------
bankrupt, is the subject of any voluntary or involuntary bankruptcy petition,
makes an assignment for the benefit of its creditors, or is unable for a period
of ninety (90) days to pay its debts as they come due, (ii) GDG fails to perform
Error corrections in a timely manner per Section 3.3 (g), which corrections
require the use of the source code for the Language and Toolkit in escrow to
resolve, or (iii) failure of GDG to provide access to the Language and Toolkit
at GDG's facility in accordance with the terms of Section 8.4 within seven (7)
days of request by MagiNet, or (iv) the earlier of payment in full of the
purchase price as specified in Exhibit B or December 31, 2002, or (v) the sale
of GDG. Upon MagiNet's obtaining the same from escrow, MagiNet shall have an
exclusive, nontransferable right to use, modify, and copy such source code (a)
Or the purpose of performing the Activities under Section 2 or obligations
described under Section 3.3 (g) (if such access is granted due to the occurrence
of an event under subsection (i), (b) to make error corrections (if such access
is granted due to the occurrence of an event under subsection (ii), or (c) to
prepare derivatives of the Toolkit and Language, in order to insure that MagiNet
will meet its commitments to MagiNet's Hospitality Industry customers by
performing the Activities described under Section 2 or obligations described
under Section 3.3 (g) (if such access is granted due to the occurrence of an
event under subsection (iii)). In the event of a release due to an occurrence of
an event under subsections (ii) or (iii), MagiNet shall, promptly upon making
such corrections or derivatives, return all source code to the escrow agent for
re-deposit, and such escrow agent shall promptly
20
compile such corrected or derived source code and provide an object code copy
thereof to MagiNet.
8.7 Derivative Works. In the event that MagiNet, following access to
----------------
the Source Code, either by direct access or via source code escrow release
terms, creates derivatives of or to the Language or Toolkit, GDG will certify in
writing (such certification will not be unreasonably withheld) to MagiNet as to
whether such derivative work is "functional" or not. If functional, GDG will
continue to support and warrant the Technology. If not functional, GDG warranty
obligations will cease, with repsect to such non-functional derivative works and
any other Technology, Upgrades or Related Technology affected by such derivative
works, and the parties will negotiate fees for GDG's support services for the
new product if desired. All installment payments will however continue to be due
per Exhibit B.
---------
9. Warranty. GDG warrants to MagiNet that (i) the rights granted under
--------
the Licensed Rights and the Documentation which GDG will provide to MagiNet will
be reasonably sufficient, as of the date hereof and on a continuing basis, to
allow MagiNet (assuming MagiNet has manufacturing skill and know-how typical of
manufacturers of hardware similar to the Technology, if any), to manufacture
products incorporating the Technology, Upgrades and or Related Technology, if
any, conforming in all material respects to the descriptions thereof contained
in the Documentation, (ii) the Technology initially delivered is all of the
Technology possessed by GDG as of the Effective Date and is sufficient to
replicate the GDG System currently installed in hotels (including all necessary
Software and Hardware as of the Effective Date); (iii) the Next Generation
Software produced using the Language will, at a minimum, be a complete
functional replacement for the Current Technology; (iv) the Technology will
perform in accordance with and will conform to the Documentation and the
Technical Requirements in the Hyatt Master Guest Video Services Agreement and
any; (v) the bug list required to be delivered is complete as of the date of
delivery to MagiNet; (vi) GDG has no actual knowledge of any facts which might
lead to a claim on infringement of any patent, copyright, trademark, trade
secret or other proprietary rights of any third party related to the Technology
or Related Technology, if any; and (vii) all source code delivered by GDG will
compile to be identical to the object code version used by GDG in its Guest
Services; provided, that MagiNet's exclusive remedy, and GDG's exclusive
obligation, for a breach by GDG of the foregoing warranty shall be for GDG to
promptly provide to MagiNet the appropriate version of the source code or the
appropriate portions thereof Subject to the terms of release of Source Code from
escrow as stated herein, in any case where GDG hag breached the obligation under
the warranty in subparagraph (i) of this Paragraph 9 ("Warranty"), with respect
to any products implementing the Technology, Upgrades and/or Related Technology,
if any, GDG will grant the necessary rights and/or provide supplemental or
corrected information or Documentation promptly after the receipt by GDG of a
detailed notice of deficiencies, but in no case in more than thirty (30) days
after receipt of such notice. MagiNet's sole and exclusive remedy concerning a
breach of the warranties set forth in subsections (i), (iv) and (v) is for GDG
to repair or replace in a timely manner Software which does not meet the
foregoing warranties provided such repaired or replaced works substantially meet
the functional specifications with equal quality as was previously provided. THE
21
FOREGOING WARRANTIES YULE IN LIEU OF ALL OTHER WARRANTIES, AND EXCEPT FOR THE
EXPRESS WARRANTIES STATED IN THIS AGREEMENT, GDG MAKES NO ADDITIONAL WARRANTIES,
EXPRESS OR IMPLIED IN FACT OR BY OPERATION OF LAW, STATUTORY OR OTHERWISE AS TO
ANY MATTER WHATSOEVER. IN PARTICULAR, ANY AND ALL WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT OF THIRD
PARTY RIGHTS ARE EXPRESSLY EXCLUDED. THE FOREGOING WARRANTY DESCRIBED IN
SUBPARAGRAPH (IV) ABOVE WILL NOT BE APPLICABLE TO THE EXTENT THE BREACH OF
WARRANTY IS CAUSED BY (A) UNCERTIFIED MODIFICATIONS OF THE TECHNOLOGY UPGRADES
OR RELATED TECHNOLOGY, INCLUDING WITHOUT LIMITATION MODIFICATION OF THE OBJECTS
OR CODE OF THE SOFTWARE, (B) INSTALLATION OF THE TECHNOLOGY, UPGRADES OR RELATED
TECHNOLOGY IN A MANNER OTHER THAN IN ACCORDANCE WITH GDG'S INSTRUCTIONS, (C)
MANIPULATION OF THE SETUP (A PARAMETERS OF THE TECHNOLOGY, UPGRADES OR RELATED
TECHNOLOGY BY A PARTY OTHER THAN GDG AND WITHOUT GDG'S PRIOR WRITTEN
CERTIFICATION THAT SUCH MODIFICATIONS, INSTALLATION OR MANIPULATION HAVE NOT
VOIDED THIS WARRANTY OR (D) ABUSE, NEGLECT OR MISAPPLICATION OF THE TECHNOLOGY,
UPGRADES OR RELATED TECHNOLOGY. In addition, GDG warranties do not apply to (
a) Software used on non-GDG hardware that has not been certified for use by GDG
to the extent such non GDG hardware caused the breach of warranty
10. Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY OR ANY
---------
THIRD PARTY FOR ANY INCIDENTAL` SPECIAL OR CONSEQUENTIAL DAMAGES, LOSS OF
PROFITS OR REVENUE, OR INTERRUPTION OF BUSINESS IN ANY WAY ARISING OUT OF OR
RELATED TO THIS AGREEMENT, REGARDLESS OF THE FORM OF ACTION, WHETHER IN
CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT PRODUCT LIABILITY OR OTHERWISE,
EVEN IF ANY REPRESENTATIVE OF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES.
11. Indemnification
---------------
11.1 Indemnity by GDG.
-----------------
a) GDG hereby agrees, at its expense, to defend or settle any
claims, action or proceeding brought against MagiNet and its Technology
distributors and Hospitality Industry Providers arising out of an allegation
that the Technology, Upgrades, or Related Technology infringe any copyright or
trade secret (the "Proprietary Rights") of any third party, and to pay any
judgments or settlements thereon; provided that GDG is promptly notified of any
such claim, action or proceeding, is rendered reasonable assistance as required,
and is permitted to direct the defense or settlement negotiations.
22
b) GDG hereby agrees, at its expense, to defend or settle any
claim, action or proceeding instituted by Hyatt or by any of GDG's distributors
as specified in Exhibit F against MagiNet arising out of an allegation that the
Technology, Upgrades, or Related Technology infringe any patent of any third
party (the "Limited-Patent Rights"), and to pay any judgments or settlements
thereon, provided that GDG is promptly notified of the institution of any such
claim, action or proceeding, is rendered reasonable assistance as required, and
is permitted to direct the defense or settlement negotiations at any time during
the term of this Agreement;
c) GDG hereby agrees, at its expense, to defend or settle any
other claim, action or proceeding instituted prior to December 31, 2002 against
MagiNet and its other Technology distributors and Hospitality Industry Providers
arising out of an allegation that the Next Generation Technology, Upgrades
thereto, or Related Technology infringe any patent of any third party (the
"Other Patent Rights"), and to pay any judgments or settlements thereon,
provided that GDG is promptly notified of the institution of any such claim,
action or proceeding, is rendered reasonable assistance as required, and is
permitted to direct the defense or settlement negotiations; and further
provided, except for claims covered by I 1. I (b) above,, that IN NO EVENT SHALL
GDG BE LIABLE TO EXPEND MORE THAN 50% OF PAYMENTS RECEIVED FROM MAGINET IN THE
AGGREGATE BY THE TIME OF INSITUTION OF THE CLAIM, ACTION OR PROCEEDING, WITH
RESPECT TO ITS OBLIGATIONS UNDER THIS SECTION 11.1(c). GDG shall have no
responsibility with respect to claims, actions or proceedings instituted after
December 31, 2002, or with respect to which GDG has expended more than 50% of
payments received from MagiNet in the aggregate by the time of institution of
the claim, action or proceeding, under this Section I 1. 1 (c), provided that
during the term of this Agreement GDG agrees to provide a reasonable amount of
technical testimony in claims, actions or proceedings brought against MagiNet
regarding prior art.
d) GDG reserves the right, at its option, to provide technical
workaround solutions for the Technology, Upgrades, Related Technology or
Licensed Rights with respect to all such claims, actions, or proceedings
instituted with respect to Patent Rights prior to December 31, 1996 in lieu of
the defense or settlement of the same, and at all times to remove (by way of
technical workarounds to the Technology, Upgrades, or Related Technology) any
allegation of any infringement of any intellectual property rights it believes
possible. MagiNet agrees at its option to either (i) implement Such workarounds
promptly upon their provision by GDG or (ii) to not implement such workarounds
but absolve GDG of any and all liability under this Section 11.1 and indemnify
GDG against and hold GDG harmless against all claims, including those from
MagiNet Technology distributors and Hospitality Industry Providers, relating to
allegations of intellectual property infringement by the Technology, Upgrades,
or Related Technology as those allegations relate to the workarounds provided.
11.2 Indemnity By MagiNet.
---------------------
a) MagiNet hereby agrees, at its expense, to defend or settle
any claim, action or proceeding brought against GDG arising out of an allegation
that any MagiNet Improvement (excluding any portion consisting of unmodified
Technology, Upgrades or Related
23
Technology) developed by MagiNet infringes upon any copyright of any third
party; provided that MagiNet is promptly notified, rendered reasonable
assistance as required, and permitted to direct the defense or settlement
negotiations.
b) Maginet hereby further agrees, at its expense, to hold GDG
harmless and to defend or settle any claim, action or proceeding brought against
GDG or in which GDG has any cause to defend itself in any way resulting from
MagiNet's relationship to and current license agreement with On Command Video as
may arise during the term of this Agreement, except in relation to defense of
GDG Technology, Upgrades, and Related Technology as addressed in I 1. I above..
11.3 Mitigation If any Technology, Related Technology, Upgrades or
----------
MagiNet Improvement, as applicable, is, or in the opinion of the indemnifying
party may become, the, subject of any claim, action, or proceeding for
infringement of any intellectual property rights of any third party, or if it is
determined that such Technology, Related Technology, Upgrade or MagiNet
Improvement, as applicable, infringes any intellectual property right of a third
party, or the use, copying, modification or distribution thereof is enjoined,
the indemnifying party may, at its option and expense: (i) procure for the other
party the right under such intellectual property right to use, copy, distribute
and/or prepare derivative works of, as appropriate such Technology, Related
Technology, Upgrade or MagiNet Improvement, as applicable, or (ii) replace such
Technology, Related Technology, Upgrade or MagiNet Improvement, as applicable,
with other functional equivalent software application or (iii) suitably modify
such Technology, Related Technology, Upgrade or MagiNet Improvement, as
applicable.
11.4 Limitations As an indemnifying party, neither party will have an
-----------
indemnification obligation for any claim of infringement arising ( i) from a
combination of Technology, Related Technology, Upgrade or MagiNet Improvement,
as applicable, with other materials not provided by the indemnifying party, to
the extent such infringement would have been avoided without such combination,
(ii) from any modification of Technology, Related Technology, Upgrades or
MagiNet Improvement, as applicable, other than a modification made by the
indemnifying party, to the extent such infringement would have been avoided
without such modification, or (iii) from compliance by the indemnifying party
with specifications, provided by the other party,, to the extent such
infringement would have been avoided by not following the specifications.
11.5 Indemnification Procedures The indemnity party shall have no
--------------------------
obligation to provide indemnification unless the other party notifies the
indemnifying party promptly in writing of such third party claim and gives the
indemnifying party control over the defense an/or settlement of such claim. If
the indemnifying party does not assume the defense of such claim within thirty
(30) days after receiving such notice, then the other party may engage counsel
of its choosing and the indemnifying party shall be obligated to reimburse the
other party for the expenses of defending such claim as incurred. The
indemnifying party may defend or settle such claim as it desires provided that
no settlement shall be made which does not contain a complete
24
release of the other party from liability. The other party may not settle any
claim the defense of which it has undertaken without the indemnifying party's
written consent, which shall not be unreasonably withheld.
11.6 Entire liability This Section 11 ("Indemnification") states the
----------------
entire liability and obligation of GDG and MagiNet, and the other party's
exclusive remedy with respect to any alleged or actual infringement by the
Technology, New Application, Upgrades, MagiNet Improvements and/or License
Rights of any proprietary right of a third party.
12. Term and Termination
--------------------
12.1 Term. The initial term of this Agreement is for ten (10) years
----
from the Effective Date, unless earlier terminated in accordance with its terms.
Thereafter, this Agreement shall automatically be renewed on its anniversary
dates for successive five (5) year terms unless earlier terminated as set forth
below.
12.2 Termination In the event of any breach of any term or provision
-----------
under this Agreement by either party hereto, the non-breaching party may send a
written notice explaining the nature of the breach to the breaching party, which
notice shall be delivered in accordance with the terms of this Agreement. If any
breach is not cured within sixty (60) days after the giving of the notice of
breach, the non-breaching party may terminate this Agreement upon written
notice.
12.3 Obligation Upon Termination or Expiration Upon the effective
-----------------------------------------
date of termination of this Agreement, (i) the License and MagiNet License to
GDG granted hereunder shall terminate and each party shall immediately
discontinue any new distribution, leasing, licensing or sale of Technology,
Related Technology, Upgrades or MagiNet Improvements, as applicable, to new
customers, (ii) the parties shall retain copies of Documentation of the Software
and MagiNet Improvements, as ray, be the case, solely for use in maintaining
such products for sub licensees, (iii) MagiNet shall warrant in writing within
sixty (60) days of the effective date of termination that, except as permitted
herein, the Documentation and related materials and all copies thereof have been
returned to GDG or erased or destroyed, (iv) GDG shall deliver to MagiNet or
destroy all MagiNet Improvements ( in the form of software or documentation) and
related materials in GDG's possession furnished hereunder by MagiNet, together
with all copies thereto and (v) GDG shall warrant in writing within sixty (60)
days of the effective date of termination that such MagiNet Improvements (in the
form of software or documentation) and related materials and all copies thereof
have been returned -to MagiNet or erased or destroyed. Except as permitted
herein, MagiNet and its assignees and sublicensees and each third party
manufacturer of MagiNet shall return all Documentation in accordance with (ii)
and (iii) above. After termination of this Agreement, existing installations of
Technology, Upgrades, Related Technology and MagiNet Improvements will be
permitted to continue to operate and each party will continue to pay
installments and or royalties as applicable on existing installations in
accordance with the terms of this Agreement.
25
13. Disputes Any disputes arising out of the Agreement shall be resolved
--------
by binding arbitration under the rules of the Judicial Arbitration and Mediation
Services/Endispute in San Francisco, California (hereafter "JAMS"). A single
arbitrator shall be selected according to JAMS rules within thirty (3O) days of
submission of the dispute to JAMS. The arbitrator shall conduct the arbitration
in accordance with the California Evidence Code. The arbitrator shall have the
power to enter any award that could be entered by a Judge of the Superior Court
of the State of California siting without a jury, and only such power, except
that the arbitrator shall not have the power to award punitive damages, treble
damages, or any other damages witch are not compensatory, even if permitted
under the laws of the State of California or any other applicable law. The
arbitrator shall award the prevailing party its costs and its reasonable
attorneys' fees, and the losing party shall bear -the entire cost of the
arbitration, including the arbitrator's fees. The arbitration award may be
enforced in any court having jurisdiction over the parties and the subject
matter of the arbitration. Notwithstanding the foregoing, the parties
irrevocably submit to non-exclusive jurisdiction of the Superior Court of the
State of California, San Francisco, and the United States District Court for the
Northern District of California, San Francisco Branch, in any action to enforce
an arbitration award.
14. Miscellaneous
-------------
14.1 Notices Any notice or reports required or permitted to be given
under this Agreement shall be given in writing and shall be delivered by
personal delivery, telegram, telex, telecopier, facsimile transmission or
registered mail, postage prepaid, return receipt requested, and shall be deemed
given upon personal delivery five (5) days after deposit in the mail or upon
acknowledgment of receipt of electronic transmission. Notices shall be sent to
the signatory of this Agreement at the address set forth a the beginning of the
Agreement or such other address that either party may specify in writing.
14.2 Export Regulation Neither GDG nor MagiNet nor any of their
-----------------
sublicensees or assignees shall export, directly or indirectly, any information
acquired under the Agreement or any products utilizing any such information to
any county for which the U.S. Government or any agency thereof at the time of
export requires an export license or other government approval without first
obtaining such licence or approval.
14.3 Tax Treaties MagiNet shall comply with any tax treaty
------------
obligations applicable to this Agreement and, upon request, shall provide GDG
with any reasonably necessary information to document GDG's compliance with
applicable tax treaties. In the event that any local or country law requires
withholding of amounts payable by MagiNet or its sublicensees or assignees, GDG
shall be paid the net amount after such withholding.
14.4 Choice of Language The original of this Agreement has been
------------------
written in English and shall be the only authentic version.
14.5 Waiver or Delay Any waiver of any kind or character by either
---------------
party of a
26
breach of this Agreement must be in writing, shall be effective only to the
extent set forth in such writing, and shall not operate or be construed as a
waiver of any subsequent breach of the other party. No failure of either party
to insist upon strict compliance by the other with any obligation or provision
hereunder, and no custom or practice of the parties at variance with the terms
hereof, shall constitute a waiver of either party's right to demand exact
compliance with the terms of this Agreement. Nor shall either party's delay or
omission in exercising any right, power or remedy upon a breach or default by
the other party impair any such right, power or remedy. The exercise of any
right or remedy provided by this Agreement shall be without prejudice to the
right to exercise any other right or remedy provided by law or equity.
14.6 Force Majeure If by reason of labor disputes, strikes.,
-------------
lockouts, riots, war, inability to obtain labor or materials, earthquake, fire
or other action of the elements, accidents, governmental restrictions,
appropriation or other cause beyond the control of a party hereto, either party
is unable to perform in whole or in part its obligations as set forth in this
Agreement, then such party shall be relieved of those obligations to the extent
it is so unable to perform and such inability to perform shall not make such
party liable to the other party. Neither party shall be liable for any loss,
injury, delay or damages suffered or incurred by the other party due to the
above causes.
14.7 Severability The provisions of this Agreement are severable and
------------
if any one or more such provisions shall be determined to be invalid, illegal or
unenforceable, in whole or in part, the validity, legality and enforceability of
any of the remaining provisions or portions thereof shall not in any way be
affected or impaired thereby and shall nevertheless be binding between the
parties hereto.
14.8 Headings The paragraph headings and captions of this Agreement
--------
are included merely for convenience of reference. They are not to be considered
part of, or to be used in interpreting this Agreement and in no way limit or
effect any of the contents of this Agreement or its provisions.
14.9 Governing Law This Agreement shall be constructed in accordance
-------------
with and all disputes hereunder shall be governed by the laws of the State of
California as applied to transactions taking place wholly within California
between California residents. The parties exclude in its entirety the
application to this Agreement of the United Nations Convention on Contracts for
the International Sale of Goods.
14.10 Attorney's Fees. In any action to interpret or enforce this
---------------
Agreement, the prevailing party shall be awarded all court costs and reasonable
attorney's fees incurred.
14.10 Relationship of the Parties Nothing contained in this Agreement
---------------------------
shall be and construed as creating any agency, partnership, or other form of
joint enterprise between the parties. The relationship between the parties shall
at all times be that of independent contractors. Neither party shall have
authority to contract for or bind the other in any manner whatsoever.
27
This Agreement confers no rights upon either party except those expressly
granted herein.
14.11 Survival. Sections 3.1(License Grant to MagiNet),3.2(License
--------
Grant to GDG), 4 (Assignment of Distributor Agreements), 8.1 (Non-disclosure),
8.5 (Reverse Engineering), 9 (Warranty), 10. (Liability), 11 (Indemnification),
12.3 (Obligations upon Termination or Expiration), 13 (Disputes), and 14
(Miscellaneous) shall survive any termination of this Agreement.
14.12 Publicity and Public Announcements: Any publicity or public
----------------------------------
announcement by either party regarding this Agreement or the business
relationship described in this Agreement shall be subject to the prior written
consent of the other party, which will not be unreasonably withheld.
14.13 Injunctive Relief. Any breach or threatened breach of Paragraph
------------------
8 ("Protection of Proprietary Rights") by one party shall give the other party
the ability to seek injunctive relief to prevent such breach or threatened
breach, without posting a bond. The parties agree that such breach may
irreparably harm the party whose intellectual property has been or is threatened
to be disclosed, and that money damages might not be sufficient to remedy the
damage caused by such disclosure.
14.14 Counterparts. This Agreement may be executed in two or more,
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instruments.
14.15 Entire Agreement. This Agreement is the complete, entire,
----------------
final and exclusive statement of the terms and conditions of-the agreement
between the parties. This Agreement supersedes, and the terms of this Agreement
govern, 'any prior or collateral agreements or letters of intent between the
parties with respect to the subject matter hereof, except the Hyatt Master Guest
Video Services Agreement. This Agreement may not be modified except in a writing
executed by duly authorized representatives of the parties.
28
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives on the date(s) shown below.
GDG: MagiNet:
Guestserve Development Group MagiNet International Inc.
By:/s/ Philip S. Knadsen By:/s/ R.R. Creager
Printed: PHILIP S. KNADSEN Printed:R.R CREAGER
Title: DIRECTOR Title:- PRESIDENT
Date: 12/20/95 Date:12/20/95
29
Exhibit A
Technology Description
1 All of GDG's Current and Next Generation Hardware, Software and
Documentation used in the delivery of interactive guest video services
technology as of the Effective Date or as may be developed during the term of
this Agreement;
2. All of the Hardware, Software and Documentation used in the delivery
of interactive guest video services technology required to be delivered and/ or
used under the Hyatt Master Guest Video Services Agreement during the term of
such agreement, including but not limited to all interactive guest video
services defined as Technical Requirements therein and further described in
Exhibit A ("Technical Requirements") of the Hyatt Master Guest Video Services
- ---------
Agreement; and
3. Any other Hardware or Software enhancements to the interactive guest
video services technology developed by GDG as Upgrades or New Applications.
30
EXHIBIT B
LICENSE PAYMENTS AND PAYMENT DEPOSITS
1. License Cap: The aggregate license shall be a maximum of [***] payable in
-----------
installments over a 7-year period as described below:
2. Installment Deposits: MagiNet shall pay the following installments
---------------------
("Installment Deposits")
a) An initial Installment Deposit of [***] due on January 2, 1996.
For Deposit categories 2 (b) through 2(e) below totaling [***] MagiNet will
open irrevocable commercial letters of credit with a termination date of
February 15, 1996 for item 2(b), with a termination date of March 15, 1996 for
item 2(c), with a termination date of April 15, 1996 for item 2(d) and with a
termination date of April 30, 1996 for item 2(e). It is agreed that all of the
first [***] of deposit funds will be held by GDG in a separate account as
received until all funds are received. In the event not all funds are received
by no fault of GDG performance as required by this Agreement for each deposit
payment, then GDG reserves the right to refund all deposits received and
terminate this Agreement.
b) An Installment Deposit of [***] upon delivery of and acceptance within
15 days by MagiNet of all deliverables described in Attachment A for the Current
Technology.
c) An Installment Deposit of [***] upon delivery of and acceptance within
15 days by MagiNet of all deliverables described in Attachment B for the Next
Generation. Technology, or within 5 days following deposit of the Next
Generation Technology Language source code in the escrow account, whichever is
later.
d) An Installment Deposit of [***] upon delivery of and acceptance within
15 days by MagiNet of all deliverables described in Attachment C for the Tree
Machine interface to On Command Video movie system based on the Next Generation
Technology.
e) An Installment Deposit of [***] for each of the three Converter
versions upon delivery and acceptance within 10 days of 500 units of each of the
Converter versions that meet all deliverables described in Attachment D and that
are fully tested production versions deployable in hotels of MagiNet's choosing.
Within 5 days of signing this Agreement, MagiNet shall place a purchase order to
GDG for these [***] units specifying that the price of these units will be at
cost for both labor and materials, reviewable by MagiNet, payable upon delivery
of each version's lot of [***] units.
f) An Installment Deposit of [***] to be paid the later of one year after
the payment in 2(c) above or January 3, 1997; provided, however, that if all
deliverables required for
[***] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
31
the payment described in 2(e) above have not been delivered to and accepted by
MagiNet by April 30, 1996 (which acceptance shall not be unreasonably withheld)
then the Installment Deposit described in this clause 2(f) shall be one year
after acceptance by MagiNet of such deliverables.
g) An Installment Deposit of [***] to be paid one year after the payment in
2(f) above.
3. Room Installments:
------------------
a) MagiNet shall pay Seller [***] per month for each hotel, motel, or
inn room or Service Apartment ("Room Installments") which contains any software
described in 2(b) or 2(c) above ("Delivery Software").
b) For new distributors, MagiNet shall pay Seller the greater of [***]
of all room installments plus net content revenues (the total of which will not
exceed [***] or [***] for each hotel, motel, or inn room or Service Apartment
in such distributor's licensed territory, which contains any software described
in 2(b) or 2(c) above.
c) For current distributors, MagiNet shall pay installments equal to
current license fees less [***] for products deployed under the current
distribution agreements.
d) For all installations in which MagiNet has or will deploy OCV
technology up to and including the end of the second quarter of 1996 and in
which it chooses to also deploy GDG Technology, MagiNet shall pay installments
at the rate of [***] per room.
4. Credits: Room Installments for the twelve-month periods prior to the
Installment Deposits described in 2(f) and 2(g) above shall be fully credited
against such Installment Deposits and any excess shall be applied against
earlier Installment Deposits. Following the date of payment of the Installment
Deposit described in 2(g) above, all subsequent Room Installments shall be
credited at the rate of [***] per room per month against all remaining
Installment Deposits or in the case of distributors or OCV technology overbuild
installations, at the rate of [***] of installments due from distributors or OCV
overbuilds per 3 above.
5. Discontinuance:
a) As of the date of payment of the Installment Deposit described in 2(g)
above MagiNet may at its option elect to discontinue distributing the
Technology. In such event, then as of the date of notice of discontinuance all
previously uncredited and a new Room Installments shall be credited in full
against all remaining Installment Deposits until all such deposits are
completely consumed. After all deposits are completely consumed MagiNet shall
resume paying Room Installments to Seller.
b) MagiNet shall be relieved of any obligation for payment of Room
Installments to GDG to the full extent of any payments made by it at the
direction of GDG or any court or arbitrator following final judgement or GDG's
settlement of any allegation of third party
[***] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
32
infringement of its Technology that GDG desires to be paid directly by MagiNet
from the Room Installment cash payments.
6. Payments: Room Installments amounts remaining after allowable credits
--------
shall be paid within 45 days following the end of each calendar quarter.
7. Payment in Full: Seller shall be deemed to be paid in full upon the
---------------
earlier of the end of the seventh year following execution of this Agreement or
receipt by Seller of payments totaling [***].
8. Termination for Material Breach: In the event of a material breach of this
-------------------------------
Agreement by either party remaining uncurred following sixty days following
written notice thereof by the other party, the party not in default may choose
to terminate this Agreement. If MagiNet is the defaulting party Seller may
retain all moneys received and terminate the license except with respect to
installations already installed or contracted for installation for as long as
those hotels are under contract and installments are paid for each on a timely
basis as required herein. If Seller is the defaulting party the source code
escrow shall be triggered requiring delivery to MagiNet of all source code for
all Delivery Software and MagiNet shall have a fully paid license.
33
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
ATTACHMENT A
------------
CURRENT TECHNOLOGY DOCUMENTATION
---------------------------------
1. Hardware: Hardware will include all proprietary hardware created by GDG
--------
that is needed to operate its currently installed hotel guest video services
systems. The information will provide a competent hardware manufacturing firm
the necessary data (to be provided via floppy disk and printout) to reproduce
each item listed below:
a. Headend Board:
* film or Gerber files and schematic drawings
* component and vendor list with pricing and finished sample.
* applicable firmware source code
* test procedures, test software, and list of necessary fixtures,
if any
b. Watchdog Board:
* film or Gerber files and schematic drawings
* component vendor list with pricing and finished sample
* applicable firmware source code
* test procedures, test software, and list of necessary fixtures,
if any
c. NTSC Converter Control Module: Rev L6: with remote.
* film or Gerber files and schematic drawings
* component and vendor fist with pricing and finished sample
* applicable firmware source code
* test procedures, test software, and list of necessary fixtures,
if any
d. Television Control Module: Smart Box:
* film or Gerber files and schematic drawings
* component and vendor list with pricing and finished sample
* applicable firmware source code
* test procedures, test software, and list necessary fixtures, if
any
e. ICD Ethernet Board and Enclosure for straight modulation interface
* film or Gerber files and schematic drawings
* component and vendor fist with pricing and finished sample
* applicable firmware source code
* test procedures, test software, and fist necessary fixtures, if
any
f. Network Control System Computer Configurations and Wiring Schematics
* Master Computer configurations
* Slave Computer configurations
* component and vendor list with pricing
* test procedures
34
g. Rack Components and Design
* rack layouts
* wiring configurations for DCA modulation
* wiring configurations for straight modulation
* component and vendor list with pricing
2. Software: Version 6 software: The following information will enable a
--------
competent C programmer to modify and maintain this version of software:
a. Executable Object code
b. Annotated Source code
c. Block diagram
d. List of all commercial software needed to run the Software and
support its maintenance.
e. User Manuals
f. Training Manuals/documents for Hotel staff training
g. Navigation software and documentation
h. Remote monitoring software and documentation
3. Other:
------
a. Demo software with Hyatt International demo Delivery Software
as is.
b. Hyatt proposal/printed marketing material
c. Billing management procedures, documentation and recommended
third party software for data management.
d. Programming acquisition and pricing terms and information for
Guam and Saipan between Guestserve Systems International
and UMDA.
e. UMDA and TRB distributor contracts and relevant correspondence
files
f. PMS Interface Specifications and list of existing PMS interfaces.
35
ATTACHMENT B
------------
NEXT GENERATION TECHNOLOGY
---------------------------
(excluding converters; see Attachment D)
----------------------------------------
1. Software:
---------
a. Delivery Software that duplicates Version 6 functionality.
b. Toolkit Software in object code
c. User Manuals for Delivery Software
d. User Manuals for Toolkit Software
e. Remote monitoring software and documentation
f. All variations of firmware required for Current Hardware to be
utilized, if any.
2. Installed Demonstration: This product will be demonstrated in a Hyatt
-----------------------
International Hotel incorporating all the products needed to fulfill the Hyatt
contract requirements at that time as specified in Sections 1,2,3, and 4 of
Exhibit A ("Technical Requirements") of the Master Guest Video Services
Agreement between the parties. MagiNet will pay all pre-approved travel related
expenses for up to 3 GDG personnel for travel out of the US. The demonstration
will include the ability to support game scan rates from the in room devices.
When the game provider and hardware is selected, licensed and interface data is
provided to GDG, the software application will be added to the Delivery Software
library within 60 days. If MagiNet does not provide this interface documentation
for the game of their choice at least 45 days prior to the demonstration, it is
not a requirement for release of Installment Deposits from the Letter of Credit
for Next Generation Technology, however GDG remains obligated to complete the
development of the game of choice within the 60 day performance window.
3. Micropolis Interface Obligation: GDG will provide at no cost to MagiNet a
Micropolis digital server interface in the Next Genreation format upon 90 days
written notice from MagiNet of its intent to use and the location of the hotel
to be so installed. Both parties agree that this GDG performance obligation
shall not be a requirement for release of any funds due to GDG in relation to
this Exhibit B.
36
ATTACHMENT C
--------------
TREE MACHINE INTERFACE TO ON COMMAND VIDEO MOVIE SYSTEM
--------------------------------------------------------
1. Hardware: Description and specifications for Tree Machine server components
used in demonstration. The Tree Machine is a subsystem external to the OCV
system. It interfaces with the OCV system via an RS-232 serial communication
link. The Tree Machine includes all the hardware necessary to produce baseband
video (NTSC and PAL) and audio output for its applications. The A/V output of
the Tree Machine may be connected to the OCV system's switches or directly to
modulators external to the OCV system. An example application is an interactive
hotel information and reservation function. The Tree Machine must have the
capacity to store tens to hundreds of graphics Ales and display them with a
latency consistent with good user interface guidelines.
2. Software: Delivery in object code form of the Tree Machine server interface
version of the Next Generation Technology software with user documentation. The
Tree Machine will interface with the OCV system according to the OCV/ISP
Protocol. This protocol provides for the capability of the OCV system
initiating application programs on the Tree Machine and passing remote control
key stroke data to the Tree Machine.
Before an application in the Tree Machine is being invoked, the hotel guest will
be interacting with the OCV menu system. It is via the OCV menus that a Tree
Machine application will be selected. When the Tree Machine application has
been started, the OCV system will pass remote control key stroke data to the
Tree Machine application.
Movie viewing will be supported entirely by the OCV system with the OCV system's
menus.
An Integral part of the Tree Machine package is the authoring tools. MagiNet's
clients, i.e, the hotels, are expected to be able to create their own scripts
and graphics files to be displayed by the interactive hotel information and
reservation application. The authoring tools with graphical user interface will
be based on GDG's Next Generation Technology.
3. Demonstration: Demonstrated operability of a fully functional interface
accessing the maximum simultaneous streams of video and audio material stored on
the Tree Machine server functioning via keystrokes from an On Command Video
movie system made available by MagiNet. MagiNet will pay for all travel related
expenses for up to 3 interface personnel to travel to the MagiNet test site for
such demonstration.
37
ATTACHMENT D
-------------
PRODUCTION CONVERTER DELIVERABLES
---------------------------------
1. Hardware:
---------
a. 500 NTSC converter model 2001-1 per attached functionality
specifications utilizing all production version components
b. 500 PAL I converter model 2001-6 per attached functionality
specifications utilizing all production version components
c. 500 PAL B converter model 2001-4 per attached functionality
specifications utilizing all production version components
c. All drawings, manufacturing and assembly documentation
sufficient to permit MagiNet to have each converter manufactured
by any qualified contract manufacturer.
d. Complete bill of materials with volume pricing at [***] annual
units that will be less than [***] per unit in materials
cost for each converter. Actual production pricing will depend
on the vendor/manufacturer selected and volume commitments by
MagiNet.
e. Firmware required to communicate with GDG guest video services
system for each converter.
f. Procedures/documentation for the creation of television interface
firmware.
g. Remote control design, specification, and sample.
2. Performance, Test Criteria/Functionality Test
---------------------------------------------
a. Demonstrate remote control interface, including functions for
all buttons
b. Demonstrate communications with a tv and a Network Control
System.
c. Demonstrate reception and changeout of downloadable firmware with
a different tv interface.
d. Demonstrate functional interface of all input and output ports.
3. Manufacturing Quality Test Documentation:
-----------------------------------------
a. List of quality tests to be performed on each converter component
and or each converter throughout the manufacturing process
prior to final shipment.
b. Performance criteria for each test for pass/fail designation.
c. Production software and documentation used to test each converter
for functionality.
4. Performance Warranty:
---------------------
a. GDG warranties the performance of all converter designs, within
the limits of product warranties contained in this Agreement, produced under the
manufacturing quality tests in 3 above and as properly installed in hotels per
installation specifications.
5. Converter Variations:
---------------------
a. GDG will provide, subsequent to acceptance of first NTSC and PAL
converters noted in I above and receipt of deposits as specified in Exhibit B
(2e), the variations of NTSC and PAL converter designs required for performance
of the Hyatt agreement.
38
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
CONVERTER 2001-1. 2001-4, 2001-6 BLACK BOX TYPE
-----------------------------------------------
FUNCTIONALITY SPECIFICATION
---------------------------
(PRELIMINARY)
-------------
RF INPUT
Frequency [***]
[***]
[***]
Level [***]
Connector [***]
RF OUTPUT
Channel [***]
[***]
[***]
[***]
Level [***]
Connector [***]
A/V INPUT [***]
A/V OUTPUT
Video Level [***]
Audio Output Level [***]
Mute [***]
Connector [***]
IR INPUT Carrier Frequency [***]
Sensitivity [***]
Codes [***]
IR OUTPUT
Carrier Frequency [***]
Codes [***]
FORCED TUNING [***]
USER INTERFACE
Game Control [***]
Program Selelction, do [***]
Data (Printer, etc.) [***]
DISPLAY CHARACTER
Mode 1 [***]
[***]
Mode 2 [***]
HEAD END COMMUNICATION [***]
FIRMWARE
Memory [***]
Update [***]
POWER [***]
39
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
EXHIBIT C
-----------
INTELLECTUAL PROPERTY
---------------------
(REGISTERED)
------------
1. Patents: None Applicable
Patent Applications: None Applicable
2. Copyrights: None Applicable (only unregistered)
3. Trademarks: The name "Guestserve".
40
EXHIBIT D
----------
DOCUMENTATION
-------------
1. Hardware: Current Technology
---------
a. Headend Board:
* film or Gerber files and schematic drawings
* component and critical component vendor list
* applicable firmware source code
* test procedures, test software, and list necessary fixtures, if
any
b. Watchdog Board:
* film or Gerber files and schematic drawings
* component and critical component vendor fist
* applicable firmware source code
* test procedures, test software, and list necessary fixtures, if
any
c. NTSC Converter Control Module:
* film or Gerber files and schematic drawings
* component and critical component vendor fist
* applicable firmware source code
* test procedures, test software, and list necessary fixtures, if
any
d. Television Control Module:
* film or Gerber files and schematic drawings
* component and critical component vendor fist
* applicable firmware source code
* test procedures, test software, and list necessary fixtures, if
any
e. ICD Ethernet Board and Enclosure for straight modulation interface
* film or Gerber files and schematic drawings
* component and critical component vendor fist
* applicable firmware source code
* test procedures, test software, and list necessary fixtures, if
any
f. Network Control System Computer Configurations and Wiring Schematics
* Master Computer configurations
* Slave Computer configurations
* component and vendor list
* test procedures
g. Rack Components and Design
* rack layouts
* wiring, configurations for DCA modulation
* wiring configurations for straight modulation
* component and vendor list
41
2. Hardware: Next Generation Technology
--------
a. New Converters:
* One NTSC converter model 2001-1 per attached
functionality specifications utilizing all
production version components
* One PAL I converter model 2001-6 per attached
functionality specifications utilizing all
production version components
* All drawings, manufacturing and assembly documentation
sufficient to permit MagiNet to have each converter
manufactured by any qualified contract manufacturer.
* Complete bill of materials with volume pricing at
[***] annual units that will be less than [***] per
unit in materials cost for each converter. Actual
production pricing will depend on the
vendor/manufacturer selected and volume commitments
by MagiNet,
* Firmware required to communicate with GDG guest video
services system for each converter.
* Procedures/documentation for the creation of television
interface firmware.
3. Software: Current Technology
--------
a. Version 6 software: The following information will enable a
competent C programmer to modify and maintain this
version of software:
* Executable Object code
* Annotated Source code
* Block diagram
* List of all commercial software needed to run the
Software and support its maintenance.
* User Manuals
* Training Manuals/documents for Hotel staff training
* Navigation software and documentation
* Remote monitoring software and documentation
* Manufacturing Quality Test Documentation:
*List of quality tests to be performed on each
converter component and or each converter
throughout the manufacturing process prior to final
shipment.
*Performance criteria for each test for pass/fail
designation.
*Production software and documentation used to test
each converter for functionality.
b. Demo software with Hyatt International demo Delivery Software
as is.
c. Billing management procedures, documentation and recommended
third party software for data management.
d. PMS Interface Protocol documentation
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
42
4. Software: Next Generation Technology
--------
a. Delivery Software that duplicates Version 6 functionality in
source and object code.
b. Toolkit Software in object code
c. User Manuals for Delivery Software
d. User Manuals for Tollkit Software
e. Remote monitoring software and documentation
f. All variations of firmware required for Current Hardware to be
utilized, if any.
g. Delivery in object code form of the digital file server interface
version of the Current Technology software with user
documentation.
43
EXHIBIT E
----------
Sample Project Appendix
PROJECT APPENDIX NO.______
TO THE
TECHNOLOGY LICENSE AGREEMENT
Name of Project:_____________________________________
This Appendix sets forth additional and difference terms and conditions
particular to the Project(s) described below and when executed by MagiNet
International, Inc. ("MagiNet") and Guestserve Development Group, Inc. ("GDG"),
shall be incorporated by reference into the Technology License Agreement between
GDG and MagiNet effective as of Me "Agreement") and shall constitute a binding
agreement between MagiNet and GDG. Such difference or additional terms and
conditions are applicable only to the Project(s) described below and in no way
after the terms and conditions applicable to other Project(s) incorporated into
the Agreement by addition of a Project Appendix.
All the terms used in this Appendix shall retain the same meaning as
defined in the Agreement and such definitions are incorporated herein by
reference. Any additional defined terms used herein will be defined in this
Appendix and will be applicable only to this Appendix. The effective date of
this Appendix is______________________, 1995 ("Appendix Effective Date").
1 Background. The factual background for this Project(s) is as follows:
-----------
2. Purpose and Objectives. The purpose and objectives of the Project(s)
-----------------------
contemplated by this Appendix are:
2.1
2.2
(+ Stacey Snowman Adds RE Old Section 2 Deletes)
IN WITNESS WHEREOF, the parties have caused this Project Appendix No.____
to be signed by their duly authorized representatives.
MagiNet: GDG:
MAGINET INTERNATIONAL, INC. GUEST SERVE DEVELOPMENT GROUP INC.
By: By:
Name: Name:
Title: Title:
Date: Date:
Address: 405 Tasman Drive Address: 3020 Bridgeway
Sunnyvale, CA 94089 Sausalito, CA 94965
Specification Changes
In accordance with paragraph 2.2 ("Specification Changes") of the
Technology License Agreement, MagiNet requests the following change.
Changed Item:
From:
To:
Reason for Change:
Resolution of the Requested Change (to be filled in by GDG):
MagiNet agreement with the proposed resolution:
MagiNet GDG:
(Printed Name) (Printed name)
By: By:
Tide: Tide:
Date: Date:
HYATT PROJECT APPENDIX NO. 1
-----------------------------
TO THE
TECHNOLOGY LICENSE AGREEMENT
Name of Project:
This Appendix sets forth additional and difference terms and conditions
particular to the Project(s) described below and when executed by MagiNet
International, Inc. ("MagiNet") and Guestserve Development Group, Inc. ("GDG"),
shall be incorporated by reference into the Technology License Agreement between
GDG and MagiNet effective as of (the ("Agreement") and shall constitute a
binding agreement between MagiNet and GDG. Such different or additional terms
and conditions are applicable only to the Project(s) described below and in no
way alter the terms and conditions applicable to other Project(s) incorporate
into the Agreement by addition of a Project Appendix.
All the terms used in this Appendix shall retain the same meaning as
defined in the Agreement and such definitions are incorporated herein by
reference. Any additional defined terms used herein will be defined in this
Appendix and will be applicable only to this Appendix. The effective date of
this Appendix is , 1995 ("Appendix Effective Date").
1. Background. The factual background for this Project(s) is as follows:
----------
2. Purpose and Objectives. The purpose and objectives of the Project(s)
----------------------
contemplated by this Appendix are:
2.1
2.2
3. Nature of the Projects. For the Project(s) described in this Appendix,
----------------------
GDG will provide one or more of the following services as follows (check as
applicable):
____Consulting Services (with no Deliverables).
____Development and/or Installation of Software and/or Hardware.
4. Special Issues: This section describes unique facets of the Project,
--------------
or interdependencies that need to be addressed:
1.
2.
3.
5. Resources. The Resources assigned by GDG to perform the services:
----------
6. Payment Terms
--------------
6.1 Payments. As consideration for the Project(s) described in this
--------
Appendix, MagiNet shall pay GDG as follows:
6.2 Expenses. MagiNet shall reimburse GDG for out-of-pocket Expenses
--------
as follows:
6.3 Reduction. In accordance with the terms of Paragraph 2.4
----------
"Deliverables") the reduction (in either the form of a reduced
payment of a credit) for late completion of milestones shall
be:
7. Milestone Schedule:
-------------------
Milestone # Description Date
---------- ----------- -----
IN WITNESS WHEREOF, the parties have caused this Project Appendix No.
_____to be signed by their duly authorized representatives.
MagiNet: GDG:
MAGINET INTERNATIONAL, INC. GUESTSERVE DEVELOPMENT
GROUP., INC.
By: By:
Name:- Name:
Tide: Tide:
Date: Date:
Address: 405 Tasman Drive Sunnyvale, CA 94089
Address: 3020 Bridge way Sausalito, CA 94965
EXHIBIT F
-----------
GDG Distributors
1. United Micronesia Development Association (Saipan, Guam, Palau)
2. Triloka Roda Buana (Singapore, Malaysia, Indonesia, Brunei)
Exhibit G
-----------
Software Escrow Agreement
-------------------------
PREFERRED REGISTRATION
TECHNOLOGY ESCROW AGREEMENT
Account Number________________
THIS PREFERRED REGISTRATION TECHNOLOGY ESCROW AGREEMENT, including all Exhibits
attached hereto (this "Escrow Agreement", is made effective as of this
----------------
day of 1995, by and among:
(i) DATA SECURITIES INTERNATIONAL, INC. ("DSI"), a Delaware corporation;
---
(ii) GUESTSERVE DEVELOPMENT GROUP, [INC] ("Depositor"), a corporation;
---------
and
(iii) MAGINET INTERNATIONAL [INC.] ("Preferred Registrant"), a
--------------------
corporation;
with reference to the following:
RECITALS
WHEREAS, Depositor has entered into that certain License Agreement with
Preferred Registrant regarding certain proprietary technology and other
materials to which this Escrow Agreement is attached ("Software License
Agreement");
----------------------
WHEREAS, Depositor and Preferred Registrant desire this Escrow Agreement to be
supplementary to the Software License Agreement pursuant to 11 United States
Code Section 365(n); and
WHEREAS, Depositor will deposit with DSI proprietary data as described in
Exhibit A hereto (the "Deposit Material") to provide for retention,
--------- ----------------
administration and controlled access for Preferred Registrant under the
conditions specified herein.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledge, and in consideration of the promises, mutual covenants and
conditions contained herein, the parties hereto agree as follows:
1. Deposit Account. Immediately following the delivery- of this Escrow
---------------
Agreement to DSI by Depositor and Preferred Registrant (the "Delivery Date"),
-------------
DSI shall open a deposit account ("Deposit Account") for Depositor. The opening
---------------
of the Deposit Account means that DSI shall establish an account ledger in the
name of Depositor, assign a deposit account number ("Deposit Account Number"),
calendar renewal notices to be sent to Depositor and Preferred Registrant and
request the initial deposit ("Initial Deposit Material") from Depositor.
------------------------
2. Preferred Registration Account. Immediately following the delivery date,
------------------------------
DSI shall open a registration account ("Registration Account") for Preferred
--------------------
Registrant. The opening of the Registration Account means that DSI shall
establish under the Deposit Account an account ledger with a unique registration
number ("Registration Number") in the name of Preferred Registrant, calendar
-------------------
renewal notices to be sent to Preferred Registrant and request the Initial
Deposit from Depositor. DSI shall promptly notify the Preferred Registrant in
writing upon receipt of Initial Deposit Material.
3. Exhibit B. Notices and Communications. Notices and invoices to Depositor,
-------------------------------------
Preferred Registrant or DSI should be sent to the parties at the addresses
identified in Exhibit B attached hereto. Documents, payment of fees, deposits of
---------
material, and any written communication should be sent to the DSI offices as
identified in the Exhibit B. All notices hereunder of any type or nature,
---------
including payment, shall be written and deemed given upon receipt if sent by (a)
personal delivery; (b) U.S. Certified Mail, Return Receipt requested; or (c) a
private nationally prominent express carrier. Depositor and Preferred Registrant
each agree to name their respective designated contact Within seven (7) days of
the Delivery Date ("Designated Contact") to receive notices from DSI and to act
------------------
on their behalf in the performance of this obligations as set forth in this
Escrow Agreement. Depositor and Preferred Registrant agree to notify DSI
immediately in the event of a change of their Designated Contact in the manner
stipulated in Exhibit B.
---------
4. Exhibit C and Deposit Material. Depositor shall provide the Initial Deposit
------------------------------
Material to DSI Or retention and administration in the Deposit Account within
five (5) days of the Delivery Date. The Initial Deposit Material shall be
submitted together with a completed document called a "Description of Deposit
Material," hereinafter referred to as Exhibit C. Each Exhibit C must be signed
--------- ---------
by Depositor prior to submission to DSI and shall be signed by DSI upon
completion of the Deposit Material inspection. Depositor represents and warrants
that it lawfully possesses or will possess all Deposit Material, can transfer
Deposit Material to DSI and has the authority to store Deposit Material in
accordance with the terms of this Escrow Agreement.
5. Deposit Material Inspection. Upon receipt of an Exhibit C and Deposit
--------------------------- ---------
Material, DSI shall be responsible only for reasonably matching and labeling of
the materials to the item descriptions listed on the Exhibit C and validating
---------
the count of
the materials to the quantity listed on the Exhibit C. DSI shall not be
---------
responsible for any other claims made by the Depositor on the Exhibit C.
---------
Acceptance shall occur when DSI concludes that the Deposit Material inspection
is complete. Upon acceptance, DSI shall sign the Exhibit C and assign it the
---------
next Exhibit C number. DSI shall issue a copy of the Exhibit C to Depositor and
----------- ---------
Preferred Registrant in writing within ten (10) days of receipt, provided that
if DSI does not accept, it shall immediately inform Depositor and Preferred
Registrant of that and the reason for nonacceptance. DSI shall then promptly
redeposit and the procedures shall continue until accepted.
6. Deposit Changes. Depositor shall be obligated to update the Deposit Account
---------------
with supplemental or replacement Deposit Material of technology releases
promptly after Depositor delivers the golden Master of the Deposit Material to
Preferred Registrant; provided, that Depositor shall not be obligated to update
the Deposit Account more than once every four (4) months. Supplemental Deposit
Material ("Supplemental Material") is Deposit Material which is to be added to
--------------------
the Deposit Account. Replacement Deposit Material shall be destroyed or returned
to Depositor. The existing deposit ("Deposit") means all Exhibits and their
-------
associated Deposit Material currently in DSI's possession. Destroyed or returned
Deposit Material is not part of the Deposit; however, DSI shall keep records of
the destruction or return of Deposit Material.
7. Use of Released Materials by Preferred Registrant. If any Deposit Material
-------------------------------------------------
is released to Preferred Registrant hereunder, Preferred Registrant shall have a
royalty-free license (subject to any royalty provided for in the software
License Agreement) to use such Deposit Material to maintain and support the
Software (as defined in the Software License Agreement). After resolution of the
problem or end of the event, as the case may be, which led to the release, the
Preferred Registrant shall return to Depositor all copies of the released
Deposit Material, shall remove all copies of the same from its computer system,
and will so certify to Depositor.
8. Storage Unit. DSI shall store the Deposit in defined units of space, called
------------
storage units. The cost of the first storage unit shall be included in the
annual Deposit Account fee.
9. DSI's Obligations of confidentiality. DSI agrees to establish a locked
------------------------------------
receptacle in which it shall place the Deposit and shall put the receptacle
under the administration of one or more of its officers, selected by DSI, whose
identity shall be available to Depositor at all times. DSI shall exercise a
professional level of care in carrying out the terms of this Escrow Agreement.
DSI acknowledges Depositor's assertion that the Deposit shall contain
proprietary data and that DSI has an obligation to preserve and protect the
confidentiality of the Deposit. Except as expressly provided for in this Escrow
Agreement, DSI agrees that it shall not divulge, disclose, make available to
third parties, or make any use whatsoever of the Deposit.
10. Audit Rights. DSI agrees to keep records of the activities undertaken and
------------
materials prepared pursuant to this Escrow Agreement. DSI shall issue to
Depositor and Preferred Registrant a semiannual report profiling the Deposit
Account. Such report shall identify the Depositor, Preferred Registrant, the
current Designated Contacts, selected special services, and the Exhibit C
history, which includes Deposit Material acceptance and destruction or return
- ---------
dates. Upon reasonable notice, during normal business hours and during the terms
of this Escrow Agreement, Depositor and/or Preferred Registrant shall be
entitled to inspect the records of DSI pertaining to this Escrow Agreement, and
accompanied by an employee of DSI, inspect the physical status and condition of
the Deposit. The Deposit may not be changed during the audit.
11. Term of the Escrow Agreement. The term of this Escrow Agreement is
----------------------------
coterminous with that of the Software License Agreement, and my only be
terminated earlier as follows:
(a) by mutual written agreement of Depositor and Preferred Registrant and
delivery of such agreement to DSI.
(b) except in the case of non-renewal as provided above, in the event of
The nonpayment of fees owed to DSI, DSI shall provide Written notice
of delinquency to all parties. Any party to this escrow agreement
shall have the right to make the payment to DSI to cure the default.
If the past-due payment is not received in full by DSI Within one (1)
month of the date of such notice, then DSI shall have the right to
terminate this Escrow Agreement any time thereafter by sending written
notice of termination to all parties. DSI shall have no obligation to
deliver the Deposit or to take any other action under this Escrow
Agreement so long as any payment which is due to DSI remains unpaid.
Upon termination, DSI shall have the same rights with respect to the
return or destruction of the Deposit as in the case of non-renewal in
subsection (a) above; or
(c) upon termination of the Software License Agreement subject to survival
as shall return the Deposit then in escrow to Depositor after the
payment of all cost, fees, and expenses due DSI.
12. Expiration. If this Escrow Agreement is not renewed, or is otherwise
----------
terminated, all duties and obligations of DSI to Depositor and Preferred
Registrant shall terminate, except that DSI's obligation to return the Deposit
to Depositor shall survive the termination and expiration of this Escrow
Agreement.
13. Contents of Deposit.
--------------------
a. The Deposit Material delivered to DSI consists of the following as
further described in Exhibit A: source code deposited on computer
---------
magnetic media; related technical documentation, and
descriptions and locations of programs not owned by Depositor but
required for use and/or support.
b. The Deposit will be set forth in Exhibit C.
---------
14. Indemnification. DSI shall be responsible to perform its obligations under
---------------
this Escrow Agreement and to act in a reasonable and prudent manner in all
respects with regard to this escrow arrangement. Except for the duties stated in
the preceding sentence, Depositor and Preferred Registrant each agree to
indemnify, defend and hold harmless DSI from any claims, actions, damages,
costs, attorneys' fees and other liabilities incurred by DSI relating in any way
to this escrow arrangement, except insofar as such liabilities arise by reason
of DSI's gross negligence or willful misconduct.
15. Filing for Release of Deposit by Preferred Registrant. Upon notice to DSI by
-----------------------------------------------------
Preferred Registrant of the occurrence of a release condition as described in
Section 16 of the Software License Agreement ("Notice of Release") and payment
-----------------
of the release request fee, DSI shall notify Depositor by certified mail or
commercial express mail service with a copy of the notice from Preferred
Registrant. If Depositor provides DSI with Contrary Instruction (as defined
below) within ten (10) days of receipt of a Notice of Release, DSI shall not
deliver the Deposit Material to Preferred Registrant.
16. Contrary Instructions. "Contrary Instruction" is the filing of an
---------------------
instruction with DSI by Depositor stating that a Contrary Instruction is in
effect. Such Contrary Instruction means an officer of Depositor warrants that a
release condition has not occurred or has been cured, DSI shall send a copy of
the instruction by certified mail or commercial express mail service to
Preferred Registrant. DSI shall notify both Depositor and Preferred Registrant
that there is a dispute to be resolved pursuant to Section 19. Upon receipt of
contrary Instruction, DSI shall continue to store the Deposit pending Depositor
and Preferred Registrant joint instruction, resolution pursuant to Section 19,
order by a court of competent jurisdiction, or termination by non-renewal of
this Escrow Agreement.
17. Release of Deposit to Preferred Registrant. If DSI does not receive
------------------------------------------
Contrary Instruction from Depositor in accordance with the procedure set forth
in Section 16 above, DSI is authorized to release the Deposit to the Preferred
Registrant filing for release Allowing receipt of any fees due to DSI including
delivery fees.
18. Release Conditions of Deposit to Preferred Registrant. The conditions for
-----------------------------------------------------
release of the Deposit are set forth in the Software License Agreement, which
provisions are incorporated herein by this reference.
19. Dispute. Depositor and Preferred registrant agree that if Contrary
-------
Instructions are timely given by Depositor pursuant to Section 16 hereof, then
Depositor and Preferred Registrant shall submit their dispute regarding
Preferred Registrant's Notice of Release to arbitration by a single arbitrator
who is a member of the American Arbitration Association ("AAA") according to its
rules and regulations then in effect, in Palo Alto, California. The AAA shall
choose the arbitrator within two (2) days of such submission and the arbitration
shall commence within three (3) business days of such selection and shall
continue for consecutive business days until resolved. Each party shall have one
day in which to present its evidence and arguments to the arbitrator. The
arbitrator shall render his or her decision on the third day of arbitration. The
decision of the arbitrator shall be final and binding upon the parties and
enforceable in any court of competent jurisdiction, and a copy of such decision
shall be delivered immediately to Depositor, Preferred Registrant and DSI. The
sole question to be determined by the arbitrator shall be whether or not there
existed a valid release condition at the time Preferred Registrant delivered the
Notice of Release to DSI pursuant to Section 15. If the arbitrator finds that a
release condition was properly met and the Notice of Release was properly given
by Preferred Registrant, DSI shall promptly deliver the Deposit to Preferred
Registrant. All fees and charges by the American Arbitration Association and the
reasonable attorneys' fees and costs incurred by the prevailing party in the
arbitration shall be paid by the non-prevailing party in the arbitration.
20. Equitable Relief. Each party agrees the other shall be entitled to seek
----------------
equitable relief to enforce its rights hereunder, in addition to such party's
other remedies.
21. General. DSI may act in good faith reliance upon any instruction,
-------
instrument, or signature believed in good faith to be genuine and may rely in
good faith on the fact any employee giving any written notice, request, advice
or instruction in connection with or relating to this Escrow Agreement has been
duly authorized to do so DSI may provide copies of this ]Escrow Agreement or
account history information to any Designated Contact of Depositor or Preferred
Registrant upon their request. For purposes of termination or replacement, the
Deposit shall be returned only to Depositor's Designated Contact, unless
otherwise instructed by Depositor's Designated Contact. DSI is not responsible
for failure to fulfill its obligations under this Escrow Agreement due to causes
beyond DSI's control. This Escrow Agreement is to be governed by and construed
in accordance with the laws of the State of California without any reference to
the conflicts of law rules. Subject to the provisions of the Software License
Agreement this Escrow Agreement constitutes the entire agreement among the
parties concerning the subject matter hereof, and supersedes all previous
communications, representations, understandings, and
Requests from Deposit or Preferred Registrant to change the Designated Contact
should be given in writing by the Designated Contact or an authorized employee
of Depositor or Preferred Registrant.
agreements, either oral or written, among the parties. This Escrow Agreement
may be amended only in a writing signed by the parties. If any provision of the
Escrow Agreement is held by any court to be invalid or unenforceable, that
provision will be severed from the Escrow Agreement and any remaining provisions
will continue in full force.
22. Fees. Fees are due upon receipt of signed contract, receipt of Deposit
----
Material, or when service is requested, whichever is earliest. Preferred
Registrant shall pay DSI all fees due under this Escrow Agreement. If the
payment is not timely received by DSI, DSI shall have the right to accrue and
collect interest at the rate of one and one-half percent per month (18% per
annum) from the date of the invoice for all late payments. All service fees and
renewal fees will be those specified in DSI's Fee and Services Schedule in
effect at the time of renewal or request for service, except as otherwise
agreed. DSI's current Fee Schedule is attached as Exhibit D. For any increase in
------------
DSI standard fees, DSI shall notify Depositor and Preferred Registrant
at least ninety (90) days prior to the renewal of the Escrow Agreement. For any
service not listed on the Fee and Services Schedule, DSI shall provide a quote
prior to rendering such service.
IN WITNESS WHEREOF, the parties have caused this Escrow Agreement to be executed
by their respective authorized representatives.
GUESTSERVER DEVELOPMENT GROUP [INC.]
By:
Name:
Title:
MAGINET INTERNATIONAL [INC.]
By:
Name:
Title:
DATA. SECURITIES INTERNATIONAL, INC.
By:
Name:
Title:
SCHEDULE 1
TO SOURCES CODE AGREEMENT
General Description of Materials
to be Deposited
SCHEDULE 2
TO
SOURCE CODE AGREEMENT
DESIGNATED CONTACT
Account Number
Notices, Deposit Material returns
and communication, including delinquencies Invoices to Depositor should
to Depositor should be addressed to: be addressed to:
Company Name:
Address:
Designated Invoice Contact:
Contact:
Telephone:
Facsimile:
State of Incorporation:
Notices and communication, including delinquencies to Preferred Registrant
should be addressed to:
Company Name: Invoices to Preferred Address:
Registrant should be
addressed to:
Designated
Contact:
Telephone:
Facsimile: Invoice Contact:
Contracts, Deposit Material and Invoice Drive
49 Stevenson Street
Suite 200 Suite 550
San Diego, CA 92123 San Francisco, CA
94105
Telephone: (619) 694-1900 Telephone: (415) 541-9013
Facsimile: (619) 694-1919 Facsimile: (415) 541-9424
EXHIBIT H
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Severity Codes
1. During development and code acceptance:
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1. Priority. The problem is so severe that the module cannot be
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integrated into the code. These problems must be corrected as soon as possible
(Win a day or two) and the corrected module submitted to MagiNet.
2. Secondary. The problem is important, but can wait up to one week to be
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resolved unless otherwise required under the terms of a Project Appendix. The
corrected module must then be resubmitted to MagiNet. Inconsistencies in the
user interface or minor Errors in the code are examples of Secondary problems.
3. Minor. The problem exists, but does not affect the overall MagiNet
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delivery date. The corrected module must then be resubmitted to MagiNet within
two weeks unless otherwise required under the terms of a Project Appendix.
Nonconformance with standards, code modules which are too long, lack of
comments, or unclear function or variable names are examples of Minor problems.
II. After delivery to a Hospitality Industry Provider:
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The impact of an Error is a composite of many factors:
(I) the number of guests affected;
(ii) the type of service that is disrupted;
(iii) the length of the outage;
(iv) the number of times the problem has recurred;
(v) the availability of a bypass; and
(vi) the length of time the problem has been open.
There are codes for communicating the overall impact of an Error in a
consistent manner. These codes provide a means of prioritizing problems and
thus help ensure that the attention and resources devoted to each Error are
consistent with its impact.
Two (2) codes are used, as follows:
1. Severity code - refers to the level of criticality based on the nature of
the failure and the alternatives available. Severity remains the same
throughout the life of the Error.
2. Priority code - is used to distinguish between Errors of the same severity.
All Errors, unless otherwise defined are assigned, by default, an initial
priority of four If the Error is open too long, the outage is excessive, or the
Error recurs, the priority may be increased. Therefore, the criticality of an
Error increases as it ages. However, priority may also be increased by
management, based on individual Error review.
The following are the severity and priority codes to be used in the Error
management process:
SEVERITY DESCRIPTION
Critical/1 Total application outage with no bypass or alternative
available.
There is a critical impact; all the Guests are affected.
High/2 A component of the System is down, degraded or unusable.
A large number of Guests are affected. No acceptable
alternative or bypass is available.
Medium/3 A component, minor application or procedure of the
System is down, unusable or difficult to use. It is not
critical but the function or applications are
restricted. A small number of Guests are affected. An
acceptable alternative or bypass is available.
Low/4 A component or procedure not critical for Guest
satisfaction with the System is unusable. An alternative
is available, deferred maintenance is acceptable.
Resolution Times for Severity Codes:
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Associated with each severity code, there is maximum target resolution
time. If the maximum resolution time is exceeded, MagiNet may increase the
priority using the escalation procedures, as described in the next section. The
Error resolution times are as follows:
SEVERITY MAXIMUM
RESOLUTION
TIME
Critical/1 1 day
High/2 3 days
Medium/3 10 days
Low/4 30 days
Escalation and Notification Procedures:
- ---------------------------------------
Associated with severity codes and resolution times, the escalation and
notification procedures are handled by MagiNet.
For severity. 2, 3 and 4 problems, when the resolution time has elapsed
and the Error has not been fixed, MagiNet has the authority to increase the
severity and/or priority based on the following guidelines, as well as to inform
the appropriate management personnel, as required:
PRIORITY DESCRIPTION
Critical/l Target resolution time exceeded by two hundred percent
(200%); duration of outage exceeds standard by two
hundred percent (200%); Error recurs more than five (5)
times.
High/2 Target resolution time exceeded by one hundred percent
(100%); duration of outage exceeds standard by one
hundred percent (100%).
Medium/3 Target resolution dates and times exceeded by fifty
percent (50%); duration of outage exceeds fifty percent
(50%).
Low/4 Initial priority for all Errors.
PROBLEM BYPASS/RECOVERY
- -----------------------
Bypass and recovery will provide partial or complete Circumvention of a
problem, usually prior to the final resolution. These procedures may or may not
make the failing component usable again. It could be possible, for instance, to
bypass the effects of a failing component while the component itself is still
down. In this case, the service may be restored, perhaps with some degradation,
without necessarily correcting the Error.
(I) GDG will determine availability of bypass/recovery procedure;
(ii) If procedure is available, follow the appropriate instructions for
execution. It may require getting authorization from MagiNet; and
(iii) If no temporary bypass/recovery or permanent procedure exists, GDG
will proceed to find a permanent solution.